A Lannister always pays his debts. Tyrion was probably the one that said it most frequently, but the whole Lannister clan used it at one point or another. Tyrion found himself locked up in that crazy sky prison and was able to bribe the guard based on name alone. Tyrion had no money on him, but he promised the guard a reward if he did what he asked. If he wasn’t a Lannister, no chance that guard helps him and Tyrion ends up flying through the moon door. But he was a Lannister, and the guard helped because he knew he would get paid. That’s the power of a good credit score.

Even in a fantasy world, good credit was an advantage. It is just as much of an advantage in our reality and credit score impacts our life in more ways than we realize. Bad credit can affect your ability to buy a car, a house, and even impact the rates on your insurance. You wouldn’t think credit would have any impact on your retirement, but if you are paying high interest rates on everything you buy you almost certainly have less to put towards saving and investing. With this in mind, I figured I’d provide a quick overview of how to build and maintain good credit:

  • Know your credit score
    • Ignorance is not bliss and knowing is half the battle. There are countless apps and websites that will allow you to track your credit score for free. Try out the “Mint” app which is what I personally use to track mine
  • Know the most important factors that impact your score
    • Payment History
      • Pay your bills on time, no matter what. One missed payment can impact your score for up to 7 years
    • Credit Limit Usage
      • The best practice is to pay your balance off every month. When you can’t, strive to use less than 30% of your credit limit
    • Length of Credit History
      • Open a credit card as soon as you can and use it wisely, lenders want to see a track record of responsible credit behavior
    • New Credit Opened
      • Each credit account you apply for stays part of your score for two years and a good target is always having less than 2 inquiries on at a time.  Don’t open every store credit card you are offered!
    • Types of credit
      • Opening credit for a home or a car is viewed more favorably than having a host of credit cards on your report
  • Know your monthly cash flow
    • The simplest, yet most effective way, to improve is to spend less than you earn each month. Understand what you are spending money on and how that aligns with your values. Where can you trim that won’t dramatically affect your quality of life. If you’ve trimmed all you can, how can you boost income and what side gigs would fit in your schedule?

Track your credit score, know what things will raise it the fastest, and live within your means.  Before you know it, people will be saying that a (insert your last name here) always pays their debts.