When I first came to America, about 13 years ago, a friend told me, “Be a millionaire or build your credit score properly, if you want to live well in America”. You don’t need to be a millionaire to have bad credit — or good credit at that. In fact, certain traits and habits tend to follow people with good credit scores. With all that’s been written about bad credit, GOBankingRates.com took a look at some of the habits and traits people with good credit seem to share. Find out if you practice any of the below.
A Sense of Accountability
People with good credit know they are responsible for their own actions — especially when it comes to their finances.
Brandon Scivolette of Elite Moving Labor shared his personal experience with good credit, saying, “I have an excellent credit score and so do my closest friends. I don’t believe this is a coincidence, as we all have similar interest and values, the most notable being a strong sense of accountability. When we spend money, we intend to pay it back on time.
“Beyond accountability,” he added, “I think the second largest factor is financial sense. You don’t need to be a financial advisor to know that your credit score is a very big deal, yet few give it the attention it deserves. Both myself and my friends with high credit scores understand the nuances of credit and how it works.”
Use Credit Cards Responsibly
Knowing how to spend money is as important as knowing how to save it. And part of knowing how to spend responsibly is knowing how to manage your credit cards and other credit.
“People with a good credit score tend to be responsible users of credit,” said Kirk Chisholm, a financial advisor with Innovative Advisory Group. “Credit scores are based on many factors, most of which require the person to actually use their credit.”
Fail to pay back on time or run up a bill too large to pay off, and you could see your credit score fall.
Use Credit for Productive Assets
“One positive behavior that I see frequently from clients is that they use their credit to purchase productive assets, rather than depreciating assets or discretionary expenses,” Chisholm said, noting that a responsible use of credit could be for a rental property, which can “appreciate in value over time, produce cash flow and provide tax benefits.”
On the other side of the spectrum are non-productive assets, like a new car. Despite the benefits of having access to a car, buying one at face value leads you to own an asset that depreciates in value — fast.
Have a Good Relationship With Money
April Masini, a relationship expert and author, said people with good credit tend to have a good relationship with money.
“I know that may sound strange, but the reality is that money is important, and we all have relationships with it that affect our own lives and our relationships with others.”
She added that, “If people think that money is the root of all evil, they’re going to have a more complicated relationship with money that encompasses need and guilt for the need. But when people appreciate money and want to use it, save it, earn it and transact it wisely and healthfully, they’ll get to know money, what it can do, what it can do for them and what they want it to do.”
A healthy obsession with your credit score, bills and debts can keep you in the green for years to come.
On this, Valerie Rind, author of “Gold Diggers and Deadbeat Dads: True Stories of Friends, Family, and Financial Ruin” said, “People with excellent credit tend to be obsessive. We constantly check our credit card balances and make payments to ensure our utilization is at the optimal ratio. I’m so afraid of marring my perfect payment record that when I receive a credit card bill, I pay the minimum payment online immediately.”
Rind said she makes the minimum immediately to ensure that, if she forgets to set up an automatic payment or pay the remainder of the balance in full by the end of the month, she won’t get dinged for a missed payment. This strategy also protects her in case there’s some “online snafu.”
“Yes, it’s all a bit obsessive,” she admitted, “but that’s part of how I’ve maintained a credit score over 800 for many years.”
Knowing when to wait on a purchase, or skip it altogether, takes discipline — and, at times, a bit of creativity.
“Delayed gratification and creativity are two traits that people with good credit share,” said Rob Andersen of Mustard Seed Money. “Focusing on long-term objectives is what drives them rather than instant reward. Future goals enable them to build up their bank account by giving them the fortitude to say no to small temptation spending that can add up over time.”
The creativity comes into play when you learn how to enjoy life without blowing all your money. “It doesn’t take originality to decide to eat at a restaurant with friends. Entertaining at home,” he said, requires more thought. “Add a theme to the at-home party, and imaginations go wild.”
Understand Why Credit Matters
Shahar Ziv, founder of financial education firm Acing Your Finances said people with good credit have an “appreciation for why it is so important. For example, these individuals understand how pristine credit results in lower interest rates on mortgages, auto loans and refinanced student loans that translate into thousands of dollars saved.”
Moreover, people with good credit know how to maintain good credit, because they educate themselves. “They know they can get a free copy of their credit report from each of the three reporting bureaus once a year, and they take advantage of it,” Ziv said.
Knowing how much credit matters means putting it ahead of other priorities, too, and taking the time and effort to maintain it.
Maintaining good credit doesn’t mean you can’t put a bit of your finances on autopilot, though — so long as you do regular checkups on your accounts.
“A good habit that I have practiced personally for years and recommend to all of my clients is to have your finances automated,” said Clint Haynes, financial planner and president of NextGen Wealth. “In other words, all of your bills, including mortgage, utilities, cell-phone, credit cards, etc., should be automatically drafted from your checking account on a monthly basis.”
He said this ensures your dues are paid on time, every month. Automating payments, he added, “will give you extra time in your life. Setting all of this up for auto draft will only take a few minutes per account, but you’ll easily make that up within a month or two.”
This article originally appeared in the GoBankingRate.
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