National Credit Education Month is the perfect time to build on your foundational knowledge of credit and take steps to improve your financial health.

How Credit Works

Credit is a way to borrow money or access goods and services with the understanding that you’ll pay back the lender at a later date, usually with interest. When you use credit, lenders assess your creditworthiness based on your credit history, which is recorded in a credit report. Each borrower has a credit report that includes information about your borrowing history and habits. Your credit score, a numerical rating of your creditworthiness, is based on this report.

Good Credit Habits

1. Monitor Your Credit Score Regularly

   Keeping an eye on your credit score can help you stay informed about your financial health. Regularly monitoring your credit activity can alert you to any sudden changes and even help you spot potential fraud.

2. Diversify Your Credit Mix

   Having a mix of different credit types, such as credit cards, installment loans, mortgages and auto notes, can positively impact your credit score as opposed to having only a few lines of the same credit, such as a couple of credit cards.

3. Be Cautious with Co-Signing

   Those with lower-rated or younger credit histories may not be able to get the same credit as those with more established credit histories. Sometimes, a lender might require a co-signer, such as when financing an automobile. Be cautious of who you co-sign with for any loans. Late or missed payments could negatively impact your credit or leave you on the hook for debt.

4. Keep Old Accounts Open

   The length of your credit history is a significant factor in your credit score. Keeping older accounts open, even if you rarely use them, can help maintain a longer credit history and help improve your score.

5. Manage Hard Inquiries

   Every time you apply for new credit, a hard inquiry is recorded on your credit report. Too many hard inquiries in a short period could lower your credit score. Keep a close eye on how often you apply for a new credit card. Space inquiries out when you can.

6. Make Payments On Time

   It’s common sense. Making your payments on time can help avoid late fees and keep the payment information that goes on your credit report positive and consistent. Consider setting up automatic payments if your lender offers them to avoid accidentally missing payments.

By understanding how credit works and building good financial habits, you can help ensure that you’re doing everything you can to maintain a healthy credit score.

Are you looking for a credit card to help give you financial flexibility? Cadence can help. We have a variety of solutions to help you find the right card for your needs. Visit CadenceBank.com/creditcard to get started.

Sources:
https://www.usa.gov/credit-score
https://www.cnbc.com/select/how-to-boost-your-credit-score-fast
https://consumer.ftc.gov/articles/understanding-your-credit

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.