Why Your Friends Have Better Credit

Friends chatting ignoring upset friend
© JGI/Jamie Grill / Blend Images / Grill

If it seems like all your friends have achieved credit score nirvana and left you to suffer with mediocre credit, it’s probably because they’re making financially sound decisions you didn’t even know you needed to make. Check out what your friends are doing to get their credit scores in tiptop shape.

1. They’re paying their bills on time each month.

While you’re skipping your credit card payments and asking your creditors for an extension, your friends with good credit are making their monthly payments on time each month.

Since payment history is one of the most important factors affecting credit scores, your punctual friends see their credit scores rise. Meanwhile, your credit score is going the way of the Titanic.

Not only are they paying on time, they’re paying well above the minimum payment each month, which keeps their credit card balances as a level that’s conducive to a good credit score.

2. They don’t use their credit cards to buy things they can’t afford...

...because if you can’t afford to pay for it, then you can’t afford the credit card payment. Charging more than you can afford puts you at risk of missing credit card payments and hurting your credit score.

3. They’re not maxing out their credit cards.

Your friends with good credit only charge what they can afford and that means keeping a low credit card balance. In response, the credit score calculator says “Hey, these people are very responsible with their credit card usage, they should be rewarded with better credit scores.” On the other hand, you just used your last $5 in available credit on a Starbucks latte.

Your credit score wasn’t too happy about that.

4. They’re not applying for new credit cards all the time.

Instead, they’re opening up new credit cards sparingly, maybe to take advantage of a zero percent balance transfer deal or to get a nice signup bonus. On the other hand, you made three new credit card applications last week because all your other credit cards are maxed out.

Your credit score didn’t like the inquiries into your credit history or the way the new credit cards lowered your average credit age.

5. They keep all their important credit cards in rotation.

When credit cards go unused for several months, the credit card issuer can close the credit card. After a certain period of time, closed credit cards are no longer factored into the credit scoring calculation and your credit score could suffer if an old credit card or one with a large credit limit is closed.

6. They’re not taking out loans with payments they can barely afford.

Instead, they save up a down payment for big loans like an auto loan or mortgage, shop around for the best rates, and only take on a loan with a payment they can afford. And if they can’t afford the loan payments, they walk away until they can comfortably afford the loan. When you accept a loan with high payments, you put yourself at risk of late payments, repossession, and foreclosure, all of which have a devastating affect on your credit score.

7. They’re not dodging debt collectors.

Because your friends pay all their bills on time – not just the ones on their credit reports – they don’t have the awful blemish of a debt collection on their credit reports.

Running from debt collectors may eliminate the immediate burden of having to face the debt, but the longer debt collections go unpaid, the longer it will take you to build your credit score.

8. They know what it takes to build a good credit score.

It’s kind of hard to achieve a goal if you don’t know the steps it takes to reach that goal. Understanding credit and how credit scores are calculated is one of the best ways to building your own good credit score.

9. They monitor their credit regularly.

Checking your credit on a regular basis allows you to correct harmful credit report errors or change any habits that lead to a damaged credit score.

You can monitor your credit for free using CreditKarma.com and CreditSesame.com. Both have mobile apps that make it easy to manage your credit right from your smartphone. Don’t forget to also pull your free credit reports from AnnualCreditReport.com.

10. Because you think they do.

You’ve probably heard the saying “Perception is reality.” It’s possible that your friends don’t have the great credit you think they do. Regardless of your friends’ credit standing, you can achieve a good credit score if you use credit wisely, clean up any past due amounts, and ditch any bad habits that are holding your credit score hostage.