Imagine this: you receive an email notification that your credit card bill is almost due. You acknowledge receipt of the reminder and quickly place it in the trash. A few days later, another message tells you that you need to make a payment tomorrow. Any reasonable person would just pay it right away, or set a reminder for the next morning so they know they need to take care of it. But not you. You let the bill sit there, unpaid, until it’s a month past due and you are charged additional interest.
Well, I’m not proud to admit I’ve been in this predicament before, which has resulted in a lowered credit score, a big factor in his financial health – and all because of my own laziness.
When it comes to personal finance, your credit score carries a lot of weight. “Some people think debt in general and credit cards in particular are bad and should be avoided at all costs,” says Thomas Murphy, Texas-based certified financial planner and CEO of Murphy and Sylvestre. “Having no credit history, however, has the same negative effect as bad credit. Getting an apartment, insurance, and in some cases a job are all more difficult without a good credit rating. “
Ultimately, according to Equifax, with a rating scale of 300 to 850, you should aim for a score of 700 and above. The closer to 850, the better. In order to get and maintain a good score you will need to have good habits in place, which seems easier said than done if you are a natural slacker.
But creating a great balance sheet with creditors doesn’t have to be laborious. And if you don’t have a credit history, there are a number of options for creating one from scratch. Below are some simple tactics you can use to improve your reputation with credit bureaus and future lenders.
1. Get a secure credit card
One of the most common ways to start building credit is to apply for credit. secure credit card. Instead of relying on a solid credit history, these cards allow you to put up a security deposit. The amount you deposit will also serve as a credit limit and you will receive the deposit when you close the account. Keep in mind that while many card issuers are more than willing to approve secure credit cards for people without credit, your interest rate will likely be the highest and your line of credit may be low.
2. Become an authorized user on a credit card
If the thought of getting your own credit card sounds a little daunting, ask a parent, trusted friend, or family member with healthy financial habits if you can become one. Authorized user on theirs. If they’ve always paid their bills on time, it can have a positive impact on your credit, even if you don’t personally use the card.
3. Always pay your bills on time
The easiest way to increase your credit is to pay your bills on time, preferably before they are due. If you’re a forgetful person, set reminders and mark due dates on a calendar or physical diary (or both) for invoice due dates so you don’t forget them. You can even try using a responsibility buddy to keep you on track with every monthly payment.
4. Configure monthly automatic payments
If you can afford it, set up automatic payments for all your important invoices is a smart way to make sure you pay them on time every month. When you put your payments on autopilot, you don’t have to worry about managing them manually or risking forgetting a statement. You can usually sign up for automatic bill payment through your bank, or even on your individual utility accounts.
5. Use your credit cards sparingly
A popular but important tip for achieving a good credit score is to use your line of credit as little as possible – that is, to keep your credit utilization rate low. A good rule of thumb is to never use more than 30% of your available credit at any given time. When you use your credit cards sparingly, you can still afford to pay off what you owe. This can have a positive impact on your credit score because it tells lenders that you are more likely to pay off your balance.
6. Pay off your balances in full
Contrary to popular belief, there is absolutely no need to carry over a credit card balance from month to month in order to build up credit. It is actually advisable to fully pay your bills before the end of each billing cycle so that you do not accumulate interest and unnecessarily pay money to your creditors.
In the end, it’s much easier to damage your credit than it is to get it back. This is just one of the harsh realities of personal finance, and you should take it into account whenever you feel tempted to swipe your credit card for a frivolous purchase beyond your budget.
Having good credit, however, doesn’t really require a lot of work on your part. Find out how to make sure you pay your bills on time and use the tips above, and you’ll be on your way to achieving your credit score no matter how lazy you are.
* CORRECTION * (December 3, 2018, 10:23 p.m. ET): An earlier version of this article incorrectly stated the length of time before a missed payment triggers a lower credit score. It’s a month, not a week. In addition, a suggestion to round credit card payments to the nearest dollar has been removed; having a small positive balance is not an effective method of improving a credit score.