Checking your credit score. It's up there with going to the dentist or getting your oil changed as things you might avoid doing even though you know just how necessary they are.
We know, we know: The world of credit reports and credit scores can be intimidating, especially if you are just starting out or you've made credit mistakes in the past. But being informed about your credit situation is the first step toward improving it.
And now's the time to start. The sooner you take action, the easier it'll be to build a good credit score.
Before you get too overwhelmed, remember this: It's never too late. Small changes have a way of making a real difference over time, and your credit is no exception.
Here are five things that you can do in your 20s to help you work toward a better credit score down the line.
1. Periodically check your credit score and credit report.
We'll start with the big one: No matter how much you dread it, checking your credit health is a necessity. It'll give you a real sense of where you stand, and some tools can even help you identify actions you can take to improve. Plus, by checking your credit report, you can correct bureau errors that might be mistakenly associated with you.
While it may surprise you, checking your own credit score with a credit monitoring tool WON'T cause it to drop.
Bonus: Tools like CreditWise from Capital One allow even non-Capital One customers to check their credit for free, with no impact on their scores.
2. Keep old cards open as long as possible.
Nearly one-third of participants in the Capital One Credit Confidence Study reported thinking that closing out older, unused credit cards is good for credit. In fact, it may just be the opposite: Because credit score models take into account the average age of your card accounts, closing old cards might bring your average down, which may not bode well for your credit score.
3. Pay off your balance in full whenever you can.
Getting your account balances down to zero when your payment is due is always better than maintaining a balance, even if you're a stickler about paying the minimum every month. If you can't pay in full, always make your minimum payment on time and try to maintain an overall balance less than 30 percent of your credit line. Keep in mind that when you don't pay in full, you run the risk of racking up interest charges and increasing the total amount that you owe.
This is especially true if you have multiple balances on multiple cards.
4. Don't pay off your balance earlier than the due date.
It may sound counterintuitive, but when it comes to paying your credit card bill, earlier is NOT always better. Why? Well, if you pay off your card every month before your statement closes, it will seem like you're simply not using your credit card to credit bureaus, as your issuer will only report your zero-dollar monthly statement. While that won't hurt your credit, it may not build it either.
Instead of paying off your card right when you use it, consider letting the billing cycle run its course and then pay your balance IN FULL by the due date. This will show that you can responsibly utilize your credit line by incurring a balance and then paying it in total and on time.
5. Don't throw in the towel if you see a dip in your score.
Trust us on this: Even the most financially-minded people can accidentally miss a payment or find themselves with a pesky balance hanging around. But contrary to what many people believe, you CAN rebuild your score over time.
Think of it this way: Your credit score is less of a set-in-stone number and more like a living, breathing reflection of the financial decisions you make every month. Bad credit can always be improved, just as long as you commit to healthier credit habits going forward.