The Importance of Credit – Part 3: How to maintain good credit

Posted by Maneesh Sethi :: July 6, 2007 @ 12:09 pm

In part 2, we talked about what credit is. Here, in part 3, we will talk about how to maintain good credit.

Keeping up your credit is very important, but how do you do it? If you are still in college, you are likely in a great place. You probably don’t have very much debt outside of student loans, and you will soon start receiving income. Here are some steps to keep your credit report as clean as your dorm room just before your parents arrive.

Don’t buy what you can’t pay for. This seems obvious, but credit cards easily mask the cost of things. “Hey, if I buy this today, I only have to pay for a little bit of it each month!” you might say.

I know I get that feeling a lot, thinking that I probably have enough in my account to cover a purchase, and if I don’t I can just spread it over two months! Don’t. Paying for part of something on your credit card hurts your credit score, but buying something and paying for all of it helps it.

Never, ever, ever skip a payment. If there is any way for you to avoid it (even if it means asking your parents or friends for a quick loan), don’t miss a payment. Nothing hurts your credit more than bad payment history.

Close accounts you aren’t using. Even I’m guilty of this. If you have an account you aren’t using, get rid of it. Extra credit cards that aren’t necessary hurt your credit score. Simplicity is the goal here---remove accounts, remove unnecessary excess spending, and increase your score.

Check your statements. If there is any sort of discrepancy in your credit statement, find out why. Last year, I got home from a math midterm and decided to check my online bank account. Surprise! $600 dollars spent at Jamba Juice. I like Jamba Juice , but not that much. Fortunately, I called my credit cart company and got all my money back.

Check your credit report. I briefly mentioned this in the last article, but checking your credit report can save you from years of difficulty with identity theft. Check out Mike Smith’s article here for more advice from Lending Club on this issue.

These are good ways to keep your credit in fine shape. But what if something really bad happens and you need to completely revamp your score? We’ll address that topic in part 4.