Here’s How to Manage Your Credit Like a Millionaire (Even If You Live on Ramen)

You dream big, and why not? You can see yourself snacking on lobster and caviar while chilling on a yacht.

In real life, you’re actually chowing down on ramen noodles on your cheap futon.

But it doesn’t have to be this way. It’s time to start practicing what you dream.

Ask yourself this: What do millionaires know that I don’t?

Let’s start with credit. No, no, don’t roll your eyes! If you ever want to make it big, you need to improve your credit score. It needs to shine like the hood ornament on a Mercedes. The better your score, the better deal you’ll get on houses, cars and credit cards.

So why not start managing it like a millionaire? Here are a few secrets from the extravagantly wealthy:

1. Have Way More Credit Than You Actually Use

“Keep everybody guessing as to what your next trick is going to be. Don’t become too predictable.” — Sam Walton, founder of Walmart

Can you imagine the credit limit on a millionaire’s credit card?

Now, do you think millionaires actually use all of that? No, you can bet they don’t. Here’s the secret: To keep your credit score in great shape, use less than 30% of your credit.

This percentage is your “credit utilization rate.” To see what yours is, log into Credit Sesame, a free service that breaks your credit score down into categories and grades them so you can see exactly what needs your attention.

If your credit utilization gets an “A,” great! If not, it will offer personalized suggestions to better manage your credit. If you’ve been paying your credit cards on time, ask your credit card company for an increased spending limit. Then, think like a millionaire — and don’t use it.

Credit Sesame helped single mom Melinda Smieja, of Washington state, pay off nine credit cards and raise her credit score by 284 points.  

2. Don’t Just Get a Credit Card — Get the Right Card

“I just want to be remembered as somebody who paid his debts.” — Roger Moore, actor who played James Bond

Paying your credit card bills on time is an absolute must if you want to boost your credit score. In a perfect world, you should pay them off in full every month.

So why even use them?

Here’s another thing millionaires know: If you get the right credit card, it’ll pay you back. Look for cards that have no annual fee but offer rewards like cash back, travel points or some other perk.

And if you’re not sure which card is right for you, Credit Sesame can help pair you up with the best credit cards for you, based on your credit score.

Using credit cards helps you build a credit history. Paying them off boosts your payment history. By choosing the right card, you could also be flying first class or treating yourself to a bottle of bubbly with your rewards.

Now that’s living rich.

3. Let Your Credit Age Like a Fine Wine

“Rich people plan for four generations. Poor people plan for Saturday night.” — Gloria Steinem, feminist and author

Did you know credit age is a factor in your credit score? Who knew? Creditors and lenders like to see an average account age of more than five years.

So if you’re closing out those store cards you haven’t used in a while, you’re not doing yourself any favors. Let them be. In fact, it can be a good idea to charge something on them at least once or twice a year, just to keep the account active and in good standing.

So what happens if you need to get a new loan or credit card? It could bring your score down temporarily because it’s brand new, but don’t fret. Just keep a few older accounts open to keep that average age where you want it. Just one credit card that’s 15 years old can help offset the effect of new credit.

Credit age, while important, only accounts for 15% of your score. So be mindful of it, but don’t lose sleep over it.

4. Diversify Your Credit Like It’s a Millionaire’s Portfolio

“You must gain control over your money, or the lack of it will forever control you.” ― Dave Ramsey, financial guru

You always hear how important it is for an investor to diversify their portfolio. Why? Because if you have millions of dollars in investments, you don’t want all of your eggs in one basket.

OK, so we’ve all heard that. It’s not exactly news. But what about this? Another sneaky part of your credit score is your credit mix. This is based on the types of credit and debt you carry, like car loans, mortgage, credit cards and student loans. Having a diverse credit history shows lenders you have the ability to handle different types of accounts, and that helps boost your score.

Should you go buy a house on a whim like a movie star, just to get a mortgage into the mix? Of course not.

But if you’re looking at a home remodel of some type or other expense, consider getting a loan rather than putting it on a credit card. For example, Florida resident Jerry Morgan told us Credit Sesame helped him realize a car loan could improve his score.

With Credit Sesame’s advice, Morgan raised his credit score 120 points in just six months.

Boom. You’re diversified and rocking your credit score like a big-wig.

5. Be Smart When Shopping Around

“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” — Bill Gates, second-richest person in the world

Do you think millionaires just buy whatever they want without looking at the cost? A few, maybe, but most of them didn’t get to be millionaires by being frivolous with their money.

And neither should you. If you’re thinking about buying a car or a home, shop around to see who will give you the best interest rate. A few percentage points can mean a lot of money over the course of a loan. Most online marketplaces can give you quotes without impacting your credit score.

To avoid applications and inquiries that could hurt your score, use Credit Sesame to check out your personalized buying power. This shows you what credit cards, loans or mortgage amounts you’ll likely qualify for before you apply. No getting dinged for overreaching. You’ll know right away.

Give Your Credit Score the Millionaire Treatment

“A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.” — Suze Orman, financial advisor and motivational speaker

You don’t have to rake in millions of dollars to have a credit score that gleams like gold. Just give it a little love and attention, and it could actually help you get a little bit closer to the rich life.

By managing your credit and boosting your score from good to excellent, you can open opportunities you wouldn’t otherwise have. You can get that great mortgage rate. You can get an auto loan rather than buying a beater off Craigslist.

To check your credit score — and learn how to make it better — sign up for Credit Sesame. It’s free, it’s easy, and it’ll coach you to manage your credit like a millionaire.

Tyler Omoth is a senior writer at The Penny Hoarder who loves soaking up the sun and finding creative ways to help others. Catch him on Twitter at @Tyomoth.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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