- Niké Ojekunle previously used his credit card in a way that negatively impacted his credit rating.
- She started using her credit card to make small purchases and pay them off in full twice a month.
- She also automated her payments and kept her balance below 30% of her credit limit.
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When Niké Ojekunle, a Los Angeles fashion and skincare blogger at Specs and Blazers, was in her 20s, she used her credit card in ways she had no idea would have a negative impact on his credit rating. She often made late payments or only paid the minimum due. She would also have a balance close to her credit limit.
“As an immigrant, and also in African-American culture in general, we’re not really taught the power of credit. We’re taught to stay away or destroy it, like nothing in between. So , I really want to use my platform to teach people that it’s okay to use credit,” says Ojekunle.
It wasn’t until she had the desire to buy a home that she realized that having a good credit history was important to getting a better interest rate on a mortgage or home loan. long term. This realization made him want to fix his credit rating.
The simple techniques she has learned and implemented to date continue to improve her credit rating. Here’s what she does:
She uses her credit card like a debit card
In the past, Ojekunle avoided using her credit card for everyday purchases. In her mind, it was reserved for emergencies where she needed to make a big payment that she didn’t have cash for. This meant that during the months when she couldn’t pay her rent, she used her credit card to pay it. If she had a car payment she couldn’t make or a medical bill she couldn’t afford to prepay, she also used her credit card. These large charges meant she was approaching her credit limit every time she used her card.
She eventually learned that using her Chase Sapphire Preferred® card instead of her debit card for small everyday purchases like food and gas was a great way to rebuild her credit. Since the fees are low, she is able to pay her balance in full more frequently.
“I wouldn’t use my credit card because I was always scared of it, which doesn’t help because with credit you have to show you’re using it and then pay it back,” Ojekunle told Insider. .
She remains below 30% of her credit limit
She set a personal goal, which was to stay below 30% of her credit limit. She logs into her Chase account daily to check her balance. In the event that she approaches this limit, she can revert to using her debit card.
“I was taught that the lower the credit usage before the due date, the better. So, for example, if your credit card limit was $1,000, you should maintain your sale at $300,” Ojekunle told Insider.
Setting a spending limit is crucial because one of the five main factors that make up a FICO score is the amount of money owed relative to the credit limit. This is because lenders may view a high credit balance as a sign that you may be at higher risk as a borrower. Experian experts also recommend keeping your credit balance below 30%.
She pays her credit card balance in full twice a month
Paying his balance every few weeks rather than every month is another habit Ojekunle has picked up throughout his career. This prevents him from building up a high balance on his statement closing date. The process also keeps its credit utilization rate well below 30%.
Eliminating payments earlier is a great habit because it commits available funds to pay off debt and reduces the risk of spending that money on other things if you push liability into the future.
Plus, interest charges accrue daily, based on your daily balance. Making early payments, even before the due date, lowers the average daily balance, which can significantly lower your interest charges if you’re unable to pay your bill in full.
She automates her credit card payments
In the past, Ojekunle wrote her payment dates on a calendar until she realized she could automate her payments through her bank each month. Now she has it set up so that the full amount due is paid on the 9th and 23rd of every month.
Automating your payments is a great way to avoid paying off debt each month. It also reduces the risk of forgetting to make a payment when it’s due, as long as you make sure you always have enough funds in your bank account to cover the balance due.
Otherwise, you may incur additional charges if a payment is rejected. You can set up payments through your credit card company‘s online bill payment feature, with the option to set it up to make the minimum payment or the full balance. If you choose the latter option, just make sure to check your balance and activity regularly.
Laila Maidan is the personal finance storyteller at Insider. She covers personal stories about people’s financial journeys. Do you have a story about a financial achievement to share? E-mail firstname.lastname@example.org.