You’ve struggled for months or maybe years, but you finally did it. You paid your credit card balance down to zero.
Maybe you used a credit card with a great balance transfer offer like a 0% intro APR to get the job done.
Perhaps you picked up a side hustle to bring in extra money so you could aggressively attack your debt.
Or maybe you did it with a simple old-school strategy: Budgeting on a cash-only basis with the envelope system.
RELATED: Budgeting with cash: How to make the envelope method work in 2018
Whatever the scenario and however you made it work, you’re now credit card-debt free — provided you don’t have any other cards to attack.
So, what now?
4 steps to take after you pay off your credit card debt
If you’ve struggled long and hard to pay off debt, you probably already have a concept in your head about what your life and your relationship with credit will look like going forward.
But is it backed up by the realities of the credit industry?
Here’s what you need to know…
1. Don’t cut your card up
This advice might fly in the face of everything you’ve heard and everything you believe to be true.
But here’s a reality check: Cutting up a card poses a double threat to your credit.
The first thing you need to know is that the amount of your debt versus the amount of available credit you have accounts for 30% of your credit score.
So if you cut your card up, it will eventually go dormant in your credit mix. After a period of time, the credit card company will see you’re not using their card and they’ll shut the line down — which reduces your amount of available credit and harms your score.
Second, if you’ve had the card for a long time, you’ll be shooting yourself in the foot by cutting it up because you’ll lower the length of your credit history. That accounts for 15% of your score.
2. Use your card twice a year — and pay it off promptly
Instead of cutting your card up, you should aim to use it twice a year (every six months) for a small purchase.
Maybe you go to the corner store and buy a pack of gum, or maybe you go to the drive-through and get a hamburger.
Whatever you buy, the key is this — you want to turn right around and pay the card off immediately in full. That shows you’re managing your credit responsibly and having no trouble paying on time as agreed.
And that’s what accounts for the lion’s share of your credit score — a whopping 35%.
3. Bank your monthly payments
You’ve struggled all this time to pay more than the minimum on your card and not charge up additional balances. Don’t stop the momentum now!
Now that you’re used to directing what could likely be a couple hundred bucks or more toward your monthly credit card payment, keep making those payments. Only now, make them to yourself instead of the credit card man.
You might consider stashing your cash in a high-yield online checking account.
4. Check your credit score
OK, so maybe this step is not so surprising.
You’ve worked hard to pay off your credit card debt and you want to see some tangible evidence of your success.
You can always get a free non-FICO credit score from CreditKarma and CreditSesame.
A lot of credit card lenders also provide your real FICO score for free either on your monthly statement in the mail or when you log into your account online.
Just give it a couple of months after you pay off your credit card before you check; your credit score won’t immediately go up. It takes some time.
Once that happens, go ahead and gloat — you’ve earned it!
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