June 20, 2022

What an ADHDer Needs to Know About Credit

What an ADHDer Needs to Know About Credit

Whether it's missed bill payments or impulsive spending, ADHD makes managing money more challenging, which, if we're not careful, can lead to low credit scores. 

The good news is you can improve your credit score and keep it in a safe zone by following a few helpful tips.

You Are More Than a Number

In the eyes of the financial world, your financial reliability boils down to a three-digit number, ranging between 300 to 850, known as your credit score. Lenders use that number to judge you on your creditworthiness.

The better your number, the better interest rates you'll be able to secure for things like car loans, credit cards, and mortgages.

Check Your Credit History Regularly

Credit bureau companies like Equifax, Experian, and TransUnion, collect information from various lenders to create your credit history report. The fewer blemishes on your account, the better your score.

It's good practice to check your credit report for errors and verify no one has opened accounts in your name.

The site annualcreditreport.com provides a limited number of reports each year. You can also sign up with Credit Karma for their free service, which alerts you when changes happen to your credit history. 

The Five Credit Score Factors

A credit score is made up of:

  • Payment History - 35%
  • Amounts owed  - 30%
  • Length of credit history - 15%
  • New credit accounts - 10%
  • Types of credit in use - 10%

Avoid these bad credit behaviors

  • Minimum payments. Only making minimum payments on credit card debt is an uphill climb, and you will see very little progress in paying off debt
  • Missing Payments. Nowadays, there's no excuse to miss a payment, especially for those with ADHD. It only takes a few minutes to set up an automatic payment cycle
  • Cash advances. There's no scenario where a cash advance is a good idea. It will immediately start accruing interest, and there's usually a fee tied to it
  • Maxing out your cards. Maxing out your credit cards means using up all of your available credit, which is one of the main things that make up credit scores
  • Closing Credit Card Accounts. Closing a card adversely affects your score by raising your credit utilization and decreasing your amount of available credit. Cut up the card or put it somewhere you won't use it, and remove the card information from all online shopping websites

Ways to Improve Your Credit Score

The two most essential things when improving your credit score are payment history and credit utilization. Remember, 35% of your score is made up of your payment history, so a long list of missing or late payments on your credit report will be a huge red flag. This is where setting up automatic payments will help.

If you have a lot of debt and have maxed out credit cards, you need to establish a debt payment plan which I covered in "Credit Cards and ADHD go Together Like Forks and Power Outlets."  Using the Snowball Method or Avalanche Method will help you establish a debt payment plan to aggressively pay off debt, which will improve your credit score.

We covered a lot of information today. Remember the big picture and that you're doing this for your future. You'll have more freedom and security, a more vibrant life, and be able to wake up feeling less stressed about money. 

Work with me:
Check out my ADHD Planning & Coaching service.

Helping ADHD'er

Helping ADHD'ers unleash their financial potential through planning and coaching.

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