3 Key Steps To Healthy Credit
I compared good credit to living a healthy lifestyle in my post about Credit Development.
My father had a heart attack in 1999.
He needed serious preventative measures to change his lifestyle so that his health would no longer be in danger due to the bad habits that contributed to heart disease.
Credit Health is preventative care for your credit.
Bad habits with credit payment schedules, acquiring new credit debt and treating it as new income, and high month-to-month utilization on credit cards are some of the factors that cause credit disease.
After college, my income was low or limited.
A bill came due that was a challenge for me to pay.
I applied for a credit card to help with the payment.
I didn’t realize that what I was doing was causing myself more harm than good.
The credit card comes in the mail, you pay the bill with the entire balance of the card, and put it in your wallet with your 14 other cards that you can’t use.
Instead of looking for ways to make the cards we have work for us, we get caught in the trap of using credit like income and piling on more and more debt.
So where do you learn good habits?
It may seem easy to say, “The answer is not to have any debt!”
But I challenge you to consider that the answer is to convert your bad debt to good debt.
Think about it. Would a good answer for my father’s health problem to have been just to tell him to stop eating?
Was the option to “stop living life” really an option for him?
My father had to change his habits and change his lifestyle to encourage good habits and reverse the effects of heart disease.
You can reverse the effects of bad credit by changing your habits and encouraging good habits to reverse the effects of credit disease.
Change your habits so that the debts you incurred pay you back and pay themselves instead of taking money out of your pocket.
At first, to get your balances back to normal, you need need to use money out of your pocket to recover.
But after you have recovered, you will no longer need to use your own money.
By the way, if you’re interested in reversing bad credit and turning your bad debt and bad habits into good debt and good habits, read this post.
Here are the 3 Key Steps to Healthy Credit.
- Give your personal credit a greater purpose. Setting money aside for emergencies is easily accomplished (see step #3). You don’t need a credit card to do this. It is okay to use your credit card for incidentals while building a credit line because you want to pay your card off every month you make that minimum payment (You’re welcome.) But don’t make that the purpose of owning the card. Make your credit card’s purpose to be used as collateral toward income producing purchases because that is where your debts pay you back
- Get organized. Here are some tools that will help you get organized with your credit accounts:
- Spreadsheets – These will help you organize the accounts, due dates, interest rates, and balances owed. When you write this down, you will have a clear picture of what you’re working with. You can create spreadsheets for many purposes, here are a few.
- Binders with pocket folders and tabs – Label the tabs, one for each month. Use one pocket folder for each month and put all of your statements and your worksheet for that month in the folder. Here’s a great way to create and organize a money management notebook.
- Apps for your smartphone – Look for apps that will help you budget your money and help you dedicate funds toward reducing your utilizations without harming your other bills. YNAB is a great one.
- Create accounts for different purposes. Bank accounts are great tools because they help you organized your money. You can make separate accounts for the following:
- Emergency fund
- Automatic payment for bills
- Fuel for your car
Accounts like these will make it easier to manage a habit to budget your money when you get income.
I hope that this article helped you. If you have any questions about keeping your credit healthy or you’ve done a review of your own credit health and want to talk about it, leave me a comment below.
If you are interested in starting the approval process off with raising your credit scores for free, I invite you to take my free, four-part, Dispute Letter Mastery Course.
In this course, you will learn how to update your personal information, dispute information that has errors, and delete negative information in order to raise your credit scores 50 – 75 points in only 45 – 60 days. A boost like this can really make a difference in your interest rates, and it is all free.