Your credit will reflect responsible, smart decisions

It’s a common misconception that good credit starts and ends with your credit score.

The truth is that between the different the types of credit requested, the many “free credit score” online services, and even the financial institution you’re using, it’s nearly impossible to gauge your own score with total accuracy. So what can you do?

Understand that the exact number isn’t nearly as important as the good financial habits that build it. Your credit will reflect responsible, smart decisions. Follow these key tips and your score will be on its way up.

Understand what you can afford to borrow — and pay back.

Since credit lets us buy things we can’t afford right now, it can have the effect of “free money.” Keep your future budget in mind to the best of your ability when you’re applying for a loan or line of credit. Remind yourself: You will have to pay back every cent—with interest.

Pay your balance in full and on time.

When it comes to calculating your credit score, payment history accounts for the majority of the number. Staying on time and on budget with your payments is so important.

Keep your credit lines varied.

This is also called having a diverse portfolio. A wide range of well-maintained loans and credit lines show that you are responsible borrower in any circumstance.

Don’t max out your credit.

Financial discipline and good/excellent credit scores show that using no more than 30 percent of your credit limit is ideal, but as long as you’re under 50 percent you’re OK.

At the root of all these tips is establishing good financial habits. Awareness is one of the most powerful tools when it comes to staying in control of your finances. When in doubt, reach out to your financial institution for individual advice on your finances.

Kat’s Money Corner is posted on Dollars & Sense every Tuesday. Kat Hnatyshyn, when not blogging or caring for her little ones, is a manager with CommunityAmerica Credit Union. For more financial chatter, visit http://communityamerica.com.

This story was originally published June 8, 2018 at 12:00 AM with the headline "Your credit will reflect responsible, smart decisions."