Building strong financial habits is always a good idea. But when it comes to your credit score, not every smart move counts. In fact, many habits that help you feel financially secure have no effect on your credit file at all.

That does not mean they are worthless. These habits can help you avoid financial stress, stay on track with bills, and build long-term stability. However, credit scores are based only on specific types of credit activity, so many of your everyday financial choices are not reflected.

1. Budgeting and tracking your spending

Keeping a budget helps you manage your income, reduce unnecessary expenses, and plan ahead. But your credit score does not measure how well you manage your cash flow or how closely you stick to a budget.

Even so, consistent budgeting can make it easier to stay on top of bills and avoid financial strain. It does not directly affect your score, but it may help support other habits that do.

2. Building a savings cushion

Having emergency savings is one of the most important things you can do for your financial health. However, your savings account balance is not included in any credit score calculation.

Saving money does not directly affect your score, even if it gives you more financial flexibility. It may help you avoid missed payments or the need to borrow, but the act of saving itself is not part of your credit profile.

3. Using debit cards or cash

Spending with debit or cash may help you avoid overspending or interest charges, but it does not create any credit history. Debit card use is not reported to credit bureaus, and neither is cash spending.

If you rely only on non-credit tools to manage your money, your credit report may remain thin or inactive. These habits can support financial control, but they will not build or improve your credit score unless you use a service like Sesame Cash. By enrolling in Sesame Credit Builder, members can build credit by making debit purchases that are reported as on-time payments to help establish credit history.

4. Investing for retirement

Contributing to a retirement account like a 401(k) or IRA is a smart long-term move, but it does not affect your credit score. These accounts are not loans or credit products; credit scoring models do not consider your investments or account balances.

Even with a strong portfolio, your score will not change. Retirement savings build financial security, but are not part of your credit profile.

5. Avoiding all debt entirely

Some people take pride in never borrowing, which can be a responsible lifestyle. But in the eyes of credit scoring systems, no credit history means no credit score.

If you avoid all loans and credit cards, you may find it challenging to qualify for credit if you ever need it. You may prefer to live debt-free, but remember that credit activity is required to build a credit file.

6. Couponing and comparison shopping

Clipping coupons, price checking, and planning your purchases are smart ways to stretch your money. But none of these habits are connected to your credit report.

These strategies may help you spend less or save more, but they do not directly affect your credit score.

7. Saving for large purchases

Setting aside money for big expenses like travel, appliances, or home repairs may be a smart way to avoid debt. Paying from savings can be satisfying and help you stay financially grounded.

But saving enough to buy a car or a home outright may take years. In some cases, it may not be realistic at all. Strong credit can be the key to moving forward without added financial strain.

Integrating good credit behavior into your money management habits

Strong money management habits like saving, budgeting, and paying bills on time help you stay financially stable. But if you are not using credit accounts, these habits typically do not affect your credit score.

There are limited exceptions. Rent and utility payments are usually not reported to credit bureaus unless they become seriously overdue. Some third-party services, such as Experian Boost or Credit Sesame’s rent reporting feature, may allow certain payments to appear on your credit file. These services are optional and apply only to specific credit scoring models.

Once you begin using credit cards, loans, or other types of borrowing, credit behavior becomes part of your overall financial strategy. At that point, habits like paying on time, keeping balances low, and managing accounts responsibly are just as important as saving and budgeting.

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Disclaimer: The article and information provided here are for informational purposes only and are not intended as a substitute for professional advice.

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Credit scores can influence everything from the interest you pay on a loan to the credit cards you can qualify for. But not all strong scores are equal. A score that’s considered good may get you approved, but a great score could get you better terms, more offers, and lower long-term costs. That gap can have a big impact on your financial future.

Credit scores by the numbers

Most lenders rely on either the VantageScore or the FICO Score to assess creditworthiness. Both use a scale from 300 to 850 and draw on similar credit report data, but the way they classify scores differs slightly.

Although people often talk about a single credit score, everyone actually has many. You may have a FICO Score 8, a VantageScore 3.0, and several industry-specific scores, such as versions used for auto lending or credit card applications. Each score is calculated using the same core credit data, but different models or lenders may weigh certain factors more heavily. This is why your score might vary slightly depending on where you check it. There is some overlap, and many models consider scores in the mid-600s to low 700s as good, and scores above roughly 740 as great or excellent.

What a good credit score can offer

If your credit score falls in the good range, you’re likely to qualify for a wide variety of loans and credit cards. You may be approved for a mortgage, get an auto loan with a reasonable rate, or open a credit card with moderate rewards.

The catch is that you may not get the best terms. Lenders use risk-based pricing, which means you might face higher interest rates or fees than someone with excellent credit, even if you both qualify for the same product.

Good credit shows that you’re responsible with debt, but lenders may still view you as a moderate risk. That uncertainty can translate into slightly stricter lending conditions.

Why a great credit score makes a difference

When your score reaches the great (very good, excellent or exceptional) range, the benefits tend to become more noticeable. Lenders see you as a low-risk borrower. That means you may be offered:

• Lower interest rates
• Higher credit limits
• Faster loan approvals
• Access to top-tier credit cards and rewards programs
• Better terms on refinancing or balance transfers

Over time, these advantages can add up. According to the Consumer Financial Protection Bureau, credit score is one of seven factors determining the interest rate you are offered on a mortgage.

What separates good from great

Great credit takes more than just avoiding mistakes. It reflects long-term, consistent financial behavior. If you already have a good score, moving up typically means refining your habits rather than overhauling them.

Several key differences tend to separate the two categories:

• Credit utilization is typically lower. Many borrowers with excellent credit use less than 10 percent of their available credit.
• Credit history is longer. Lenders like to see that you’ve managed credit responsibly over many years.
• Accounts are older and well-maintained. Keeping long-standing accounts open contributes to score strength.
• New credit applications are limited. Applying for multiple accounts in a short time can reduce your score temporarily.
• There’s a solid mix of credit types. A combination of revolving credit (like credit cards) and installment loans (like car loans or mortgages) can be a plus.

For a full breakdown of how credit score factors work, see Credit Sesame’s guide to what affects your credit score at https://www.creditsesame.com/learn/credit-score/what-affects-your-credit-score/.

Moving from good to great

If your score is already in the good range, reaching great credit status may be a matter of consistency. Paying on time every month is essential, but it’s also worth paying attention to the details.

Start by reviewing your credit reports for accuracy. A single incorrect late payment could be holding your score back. Then look at your reported credit utilization. Even if you pay your balance in full, your issuer might report a high balance at the wrong time. Paying down balances before the statement closing date can help.

If your credit history is fairly new, time will help — as long as you keep accounts open and active. Avoid unnecessary hard inquiries, and consider using a tool that lets you get credit for nontraditional payments like rent or utilities.

Monitoring your credit over time is one of the most effective ways to stay on track. A free credit monitoring tool can help you follow your progress and spot issues early.

Why the extra effort is worth it

A good credit score is a strong start. But a great score can offer more options, better pricing, and long-term savings. Whether you’re borrowing for a home, financing a car, or simply trying to qualify for a high-rewards credit card, the difference between good and great may determine how much you pay or how far your money goes.

Building excellent credit doesn’t require perfection. It does require attention, patience, and the willingness to stay consistent even when the results take time. But for many people, the payoff can be well worth it.

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Increased financial stress for households

The U.S. job market is showing signs of strain. In May 2025, the Bureau of Labor Statistics (BLS) reported that the economy added 139,000 jobs, a drop from the previous month and well below the monthly average gain for the past year. Earlier estimates for March and April were also revised downward, suggesting a broader slowdown in employment growth.

Not everyone will feel the effects of a slowing job market, but it can lead to longer job searches, more competition, and slower wage growth in some industries. These changes may create challenges for some households trying to maintain financial stability.

Does reduced income affect your credit score?

Nothing happens to your credit score as a direct result of reduced income. However, income disruption, whether temporary or long-term, can lead to financial strain. For some, that may make it more difficult to stay current on payments, particularly on credit cards, loans, or other recurring obligations. Late payments are commonly reported to credit bureaus and may negatively impact credit scores.

Others may continue making payments but rely more heavily on credit to cover expenses. That can increase their credit utilization ratio, which may also influence credit scores. Even individuals who stay current on bills could see changes to their score if balances grow significantly or if lenders reduce available credit in response to economic conditions.

Remember that missed payments are one of the most common causes of credit score damage. Managing your budget carefully and making at least the minimum payments on time can help you avoid negative marks like delinquencies or collections.

Protect your credit in an uncertain job market

No one can fully predict how the economy will evolve or how it may affect your credit, but it is always wise to adopt good personal finance and credit management practices.

• Consider building or rebuilding an emergency fund. Having savings to cover a few months of essential expenses can reduce reliance on credit during income disruptions.
• Try to make at least the minimum payments on all accounts. Maintaining a positive payment history is one of the most important factors in credit health.
• Communicate with creditors early if financial strain is expected. Some lenders offer hardship options that could temporarily pause payments or reduce fees.
• Monitor your credit regularly. This may alert you to changes in your credit report or score, giving you time to respond.

Stay alert to economic changes

Economic shifts can affect credit indirectly. If interest rates change or lending standards tighten, consumers may find it harder to access new credit or secure favorable terms. Tracking trends in your own industry or region may also help you plan ahead, especially if layoffs become more common.

Resources like the Federal Reserve Bank of New York’s Survey of Consumer Expectations offer helpful insight into how people view the job market and inflation outlook.

Some households may be eligible for support through state or federal programs if the employment outlook worsens. Being aware of those options in advance could help reduce stress and avoid late payments in the event of sudden changes. If you are experiencing financial strain, these federal resources may help:

• Hardship help for mortgages and rent
  The Consumer Financial Protection Bureau provides guidance on forbearance, rental assistance, and how to talk to your loan servicer.
• Unemployment benefits
  If you lose your job or have your hours significantly reduced, you may qualify for state-administered unemployment benefits.
• Job training and reemployment support
  The Department of Labor’s CareerOneStop site connects people to local training, career counseling, and job search help.

How good credit habits can help when the job market slows

Credit scores reflect many aspects of financial behavior, including how consistently payments are made and how much credit is being used. The broader economy plays a role in shaping opportunities and risks, but strong personal habits can help you maintain stable credit even during difficult periods.

A slowing job market might bring added pressure, but it does not automatically lead to credit problems. A proactive approach to managing your personal finances through budgeting, planning, and regular credit monitoring can help avert any negative impact and ensure you stay in control of financial outcomes.

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Your credit score reflects more than just how you borrow. It also responds to how you manage bills, track spending, and make consistent financial decisions. When these actions become part of your daily routine, it can be easier to maintain good credit habits and support long-term financial health.

1. Turning on autopay across your accounts

Autopay helps prevent late payments, which can have a significant impact on your credit score. Even a single missed payment can leave a lasting mark. Setting up automatic minimum payments on credit cards, loans, and utilities can reduce that risk. You can still aim to make extra payments manually to pay down balances or avoid interest.

Try this: Set up autopay for the minimum amount due on all credit accounts, then pay off additional amounts manually when you know your cash situation later in the month.

2. Paying your credit card weekly instead of monthly

Credit utilization is the amount of credit you use compared to your total limit, and it plays a significant role in your credit score. Even if you pay your card in full each month, a high balance at any point in the billing cycle can increase your reported utilization. Making weekly payments helps lower your balance, which may help support your score.

Try this: Choose a frequently used card and make a payment each week to help keep the balance in check.

3. Assigning one subscription to a credit card

A recurring charge such as a streaming service can help keep a credit card active. Using a credit card for a small monthly bill and paying it off in full each month supports payment history while minimizing the risk of overspending.

Try this: Pick one stable monthly subscription, connect it to a card you rarely use, and automate billing and the full payment every month.

4. Choosing a credit-building tool

Some banks and fintechs offer tools like secured credit cards, rent or utility payment reporting, and credit monitoring. These options can help you build positive habits and strengthen your credit using accounts you already manage.

Try this: Explore available credit-building tools and see which one fits your needs and goals.

5. Putting a utility bill in your name

Utility payments are not typically reported to credit bureaus unless you use a third-party service that shares that information. Taking responsibility for a household bill may give you more control over payment timing, and opting in to a reporting tool can help include those payments in your credit history.

Try this: If possible, take over one shared bill, such as internet or electricity, and explore services that allow you to report on-time payments.

6. Living in one place longer

Frequent moves increase the risk of lost mail or missed bills, perhaps leading to late payments or collections. A stable address supports better bill management and may help lenders see you as more reliable. If moving often is necessary, digital billing and mail forwarding can help reduce disruptions.

Try this: When possible, stay at one address for at least 12 months. If not, switch to paperless billing and set account reminders.

7. Using rent reporting services

Most rent payments do not appear on your credit report unless you take action. Some third-party services allow renters to report payments even if they are not on the lease, but success depends on landlord participation and reporting practices.

Try this: Sign up for a rent reporting service that integrates with your payment method and check which credit bureaus they report to.

8. Reducing regular expenses wherever possible

Lower monthly costs can help ease financial pressure, making it less likely you’ll miss a payment or carry a high credit card balance. Staying on a shared phone plan is one example, but any recurring expense you can trim may support better money management.

Try this: Review your regular bills and look for options to share, reduce, or eliminate costs that don’t need to be individual.

9. Turning a hobby into extra income

Earning a little extra money from a hobby or side gig can help you cover bills without leaning on credit. A modest income stream may allow you to pay down balances, avoid overdrafts, and make more consistent payments, supporting healthy credit habits.

Try this: Sell handmade items, offer a service, or teach a skill online. Use the extra income to cover at least one regular expense.

10. Opening a credit card for strategic use only

If you have limited or no credit history, opening a new card can help establish a positive payment record. Assigning it to one small recurring expense and paying it off monthly keeps your utilization low and adds to your credit file. It is important to manage the account responsibly.

Try this: If you are building credit from scratch, consider a secured or low-limit card and use it only for one predictable monthly charge.

The way you choose to live affects your credit

Building credit doesn’t always require major changes. In many cases, simple lifestyle choices, from automating bills to managing shared expenses, can help support responsible credit use. By understanding how daily decisions affect your credit profile, you can take steady steps toward better financial health over time.

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When someone passes away, their financial footprint does not vanish overnight. In fact, credit reports may remain active for years unless the proper steps are taken. Understanding what happens to credit scores, reports, and outstanding debts after death can help surviving family members avoid unnecessary stress, fraud, and delays in estate settlement.

Credit reports do not close automatically

A person’s credit report is not erased the moment they pass away. Instead, once a credit bureau, Experian, Equifax, or TransUnion, receives official notice of the death, it flags the report as “deceased.” This status prevents new credit from being issued and acts as a safeguard against identity theft.

The flagged credit report is eventually deleted, typically seven years after being marked as deceased. Until then, it remains in the credit bureau’s system but is not accessible to lenders or used in credit scoring.

How to notify the credit bureaus of a death

Credit bureaus may receive death notifications from various sources, but the most reliable and timely method is a direct report from someone with legal authority.

Who can notify the bureaus?

Only a legally authorized individual, typically a surviving spouse, court-appointed executor, or estate administrator, can file a direct death notice with the credit bureaus. The Social Security Administration (SSA) and creditors may report the death eventually, but those updates can be delayed.

To notify the bureaus directly, the authorized person will need to provide:

• The deceased’s full name, Social Security number, date of birth, and date of death
• A certified copy of the death certificate
• Documentation proving legal authority to act on behalf of the deceased (such as executor papers or court appointment)
• Their own contact information for follow-up

How to submit the documents

You only need to contact one of the three nationwide credit bureaus. Once notified, that bureau will share the information with the other two. Submissions can typically be sent by certified mail or uploaded online.

Here’s where to send the information:

• Equifax. Equifax Information Services LLC, P.O. Box 105139, Atlanta, GA 30348-5139
• Experian. Experian Consumer Assistance Center, P.O. Box 4500, Allen, TX 75013
• TransUnion. Submission instructions available on the website.

It is a good idea to use certified mail or another trackable method and to keep copies of all submitted documents for your records.

Once the credit report is flagged as “deceased,” it will be sealed and protected from future credit activity, helping prevent fraud and identity theft.

Review credit reports to identify active accounts

After reporting the death, the estate’s executor or court-appointed administrator should request the deceased’s credit reports from all three major bureaus. Not all creditors report to every bureau, so reviewing all three ensures a more complete picture of any outstanding accounts or obligations.

To obtain the reports, the requester must provide a certified death certificate and legal documentation showing their authority to act on behalf of the estate.

This review can reveal:

• Active credit accounts
• Joint or cosigned accounts
• Potential signs of identity theft
• Contact details for creditors who should be notified

Even accounts with zero balances should be closed unless another person is still listed as a joint account holder.

What happens to the deceased’s credit score?

Once a report is flagged as deceased, the individual’s credit score is no longer updated or used. However, the report’s historical content may still be referenced for estate settlement. For example, a creditor may verify existing debts before approving claim payouts or releasing certain assets.

Scores become irrelevant as soon as the credit file is sealed, though the underlying credit report may remain available to authorized individuals for several years.

Who is responsible for debt after death?

In most cases, debt is paid from the deceased’s estate, and not by surviving family members. The executor uses estate funds to pay off valid claims before distributing remaining assets.

Exceptions may apply if:

• You co-signed a loan or credit card.
• You shared a joint account with the deceased.
• You live in a community property state, where marital debts are shared.
• State law assigns certain debts, such as medical bills, to surviving spouses.

Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Optional agreements may apply in Alaska and Oklahoma.

It is a good idea to consult a qualified estate attorney to determine responsibilities based on your location and relationship to the deceased.

Are any debts forgiven after death?

Some debts may be canceled when a person dies:

• Federal student loans are automatically discharged. Parent PLUS loans are also forgiven if the parent or the student passes away.
• Private student loans may be forgiven, depending on the lender’s policy.
• Unsecured debts (like credit card balances) may be written off if the estate lacks the assets to pay them.

State laws may influence how remaining estate funds are prioritized between creditors and surviving dependents.

Protecting against identity theft

Even after death, an individual’s personal information can be used to commit fraud. Thieves may use publicly available details, such as those in obituaries, to apply for credit in the deceased’s name.

To help prevent this:

• Report the death to a credit bureau quickly.
• Review the deceased’s credit reports for unusual activity.
• Notify lenders and close unnecessary accounts.
• Avoid sharing sensitive personal information publicly.

These steps can prevent further loss during a difficult time.

The final countdown

Understanding what happens to a credit score and credit report after death helps families avoid identity theft, resolve loose financial ends, and settle estates with less confusion. Notifying credit bureaus and reviewing reports quickly can prevent serious issues during an already difficult time. It is one of the last (but most important) things you can do to protect a loved one’s financial legacy.

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Early lending was all about personal judgment

Before credit scores existed, borrowing decisions were based on trust. Lenders evaluated risk by relying on relationships, reputation, and perceived character. If a borrower seemed reliable or had a known employer, they might get approved. If not, they were often denied.

This approach was deeply subjective and inconsistent. It worked in tight-knit communities, but as lending expanded and populations grew more mobile, the need for standardized decision-making became urgent.

Credit reporting took shape before scoring existed

In the mid-to-late 1800s, lenders in the United States began relying on more than just personal impressions. Local merchants and banks formed credit registries to share written records about customers’ borrowing and repayment habits. These early files were manually kept and often included narrative descriptions of a person’s trustworthiness, reliability, or employment history.

In 1899, the Retail Credit Company was founded in Atlanta to centralize this kind of information. The company, which later became Equifax, sold consumer credit reports to lenders and insurers. These early reports did not include numerical scores or statistical models, but they marked a turning point, moving credit evaluation from word-of-mouth to documented records and setting the stage for future scoring systems.

Credit bureaus and scoring models emerged in the 20th century

In 1956, engineer Bill Fair and mathematician Earl Isaac founded Fair, Isaac and Company, the firm that would later become FICO, with the goal of using statistical modeling to support better business decisions.

By the mid-1900s, credit reporting companies like Equifax were expanding their data collection operations. In 1968, TransUnion entered the market and quickly became a national player. These bureaus enabled lenders to access structured records on account types, balances, and repayment behavior. This shift laid the groundwork for algorithmic scoring and brought more consistency to credit decisions.

In 1989, FICO launched the first widely used general-purpose credit score for consumer lending. Their model applied a consistent algorithm to credit report data to predict how likely someone was to repay a loan.

This scoring model allowed lenders to move beyond subjective judgment and make faster, more consistent decisions. Over time, the FICO score became the industry standard for evaluating consumer credit risk and remains one of the most widely used scoring systems in the United States.

Standardized scores become mainstream

In the 1990s and early 2000s, credit scoring became central to nearly every consumer lending decision. Mortgage lenders, credit card companies, and auto financiers began using scores as part of their automated underwriting processes.

FICO developed industry-specific versions of its scoring model, allowing lenders to tailor decisions to different types of credit. TransUnion expanded its role in the consumer credit landscape during this time, growing alongside Equifax as a major source of credit data. In 1996, the U.S. credit bureau operations of TRW, a major credit reporting company active since the 1960s, were acquired and rebranded as Experian, completing the trio of national credit bureaus that dominate the industry today.

In 2006, the three major credit bureaus Equifax, TransUnion and Experian introduced VantageScore to offer a consistent scoring model across all three databases. It was also designed to include consumers with limited credit history who might be overlooked by traditional models.

By this point, credit scoring was not just a tool but a cornerstone of modern lending. Scores were algorithmic, rules-based and standardized, marking a major departure from the personal assessments of the past.

Modern credit scoring is based on algorithms

Today’s credit scores are still built using algorithms. These models apply defined rules to credit data to generate a numerical score that reflects a person’s credit risk. Common scoring factors include:

• Payment history. Whether bills are paid on time.
• Credit utilization. How much of available credit is used.
• Length of credit history. How long accounts have been open.
• Credit mix. The variety of credit types held.
• Recent credit applications. How often new credit is sought.

Most scoring models use statistical methods such as logistic regression. Their structure is designed to be explainable so that both lenders and consumers can understand how decisions are made.

Machine learning enters the picture

Over the past decade, some lenders and credit scoring developers have begun integrating machine learning into their processes. Unlike traditional models, machine learning can identify patterns in large datasets that were previously too complex to detect.

Rather than replacing algorithms, machine learning is often layered on top to enhance accuracy. It can improve predictions, allow the use of alternative data like rent or utility payments, and adapt more easily to shifting borrower behavior.

Some lenders have built their entire risk models using machine learning, while others use it for specific tasks such as fraud detection. However, because these models are less transparent, they raise concerns about explainability and fairness.

Fintechs diversify credit access and management

Fintech (financial technology)companies are reshaping how credit is understood and accessed. Some focus on developing alternative scoring models, using data such as rent payments, utility bills, bank transactions or subscription histories to evaluate financial behavior. These models aim to assess risk for consumers who may not have traditional credit files.

Other fintechs provide tools that help consumers monitor their credit, track changes in their credit reports, receive alerts about suspicious activity and learn how specific actions may affect their scores. Some offer credit-building products, like secured cards or reporting services for on-time bill payments, to help users establish or improve their credit standing.

Fintech solutions are expanding access to credit insights, offering faster and more flexible evaluations, and helping more people engage with their credit health.

Credit scoring continues to evolve

Credit scoring has moved from reputation to rules, and now toward real-time adaptation. Currently, traditional models still dominate, but machine learning and alternative data are pushing the boundaries of how risk is assessed.

Credit scoring continues to evolve alongside data, technology, and regulation. The challenge is to maintain fairness, accuracy, and transparency as models grow more complex and influential. What began as a handshake has become an algorithmic formula, which continues to change with new data and shifting standards.

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This is not a formal assessment. It will not impact your credit score. But the way you answer these 10 yes-or-no questions might reveal how your habits might be shaping your credit profile. Be honest with yourself, this is for your own insight only. Are you credit smart?

1. Do you pay off your credit cards in full each month?

Paying your balance in full each month means you are not carrying debt from one billing cycle to the next. This not only saves you money on interest charges but also keeps your credit utilization low, both of which are good for your credit score. If you only pay the minimum, interest adds up fast, and you may find yourself stuck in a cycle of revolving debt. Lenders prefer borrowers who manage credit responsibly and pay consistently.

2. Do you know your credit score right now?

Your credit score is a snapshot of how lenders may view your financial trustworthiness. Knowing your score puts you in control. You can track improvements, catch sudden drops, and understand where you stand before applying for loans, credit cards, or even rental housing. Many people do not realize how often their credit score plays a role in decisions that affect daily life. Monitoring it regularly gives you a head start on addressing potential problems.

3. Have you made every payment on time in the past year?

Payment history is the single most important factor in most credit scoring models. A consistent record of on-time payments builds trust with lenders and supports a higher credit score. Missed or late payments — even just once — can stay on your credit report for up to seven years and lower your score significantly. If you have made every payment on time over the past 12 months, that is a strong indicator of credit responsibility.

4. Do you keep your credit usage below 30%?

Your credit utilization ratio is the percentage of your available credit that you are using. Experts generally recommend keeping this ratio below 30%, and ideally lower. For example, if your credit limit is $10,000, try to keep your balance under $3,000. High utilization can make you appear financially overextended, even if you pay on time. A lower ratio suggests you are using credit wisely rather than depending on it.

5. Have you checked your credit reports within the past 6 months?

Your credit score depends on the information in your credit reports, so it is important to make sure that information is correct. Mistakes, outdated accounts, or signs of identity theft can hurt your score and affect your chances of getting credit approval. You are entitled to one free report per year from each of the three major credit bureaus at AnnualCreditReport.com, but many people check more often using a credit monitoring service. Reviewing your reports at least twice a year helps you catch issues early and protect your credit health.

6. Do you avoid applying for credit unless you have a good reason?

Some people sign up for every new reward card or store discount they’re offered, but this can add up quickly. Each application results in a hard inquiry on your credit report, which can lower your score if too many appear in a short time. Opening new accounts without a clear purpose can also shorten your average account age and clutter your credit profile. Applying for credit only when it truly benefits your financial plan helps keep your credit history healthy and easier to manage.

7. Do you still have your oldest credit card open?

The length of your credit history makes up a portion of your credit score. Keeping older accounts open, especially if they have no annual fee and are in good standing, can help boost your score. When you close a long-standing account, it may shorten your average credit age and reduce your total available credit, both of which can impact your score. Even if you do not use your oldest card often, it can still be helping you in the background.

8. Do you use reminders or auto-pay for bills?

Missing payments is one of the quickest ways to damage your credit score, but it often happens simply because people forget. Setting up automatic payments for at least the minimum amount due, or using digital reminders, can help you stay on track. It also reduces stress and gives you peace of mind. Small systems like these can make a big difference in your long-term credit health.

9. Do you follow a budget or spending plan?

Credit health is not just about borrowing. It is also about managing the money you already have. A budget, even if you do not write it down, helps you avoid overspending, prepare for irregular expenses, and make room for paying down debt. Without a plan, it is easy to spend more than you intended and fall behind on payments. A spending plan keeps you focused and can support smarter decisions about credit use, especially during tight financial periods.

10. Do you steer clear of payday loans?

Payday loans and similar short-term lending products often come with very high interest rates and fees. They may seem like a quick fix, but they can trap borrowers in cycles of debt. These loans typically do not help your credit score and can make financial challenges worse. Finding alternatives such as negotiating with creditors, using a credit card with a lower rate, or seeking credit counseling, can be a better path forward.

How credit smart are you?

Your answers can reveal helpful patterns in how you manage credit. This is not a test with right or wrong answers, and your score will not change based on this quiz. But it might help you reflect on your habits. Consider it a quick snapshot of your current approach to credit. Count up your yeses:

1. Do you pay off your credit cards in full each month?
2. Do you know your credit score right now?
3. Have you made every payment on time in the past year?
4. Do you keep your credit usage below 30%?
5. Have you checked your credit reports within the past 6 months?
6. Do you avoid applying for credit unless you have a good reason?
7. Do you still have your oldest credit card open?
8. Do you use reminders or auto-pay for bills?
9. Do you follow a budget or spending plan?
10. Do you steer clear of payday loans?

If you answered “yes” to most of these questions, you may already have habits that support a healthy credit profile. If you answered “no” to a few, that is not a failure. It just highlights areas where you might want to focus next. Credit habits can evolve. Even small changes can make a difference over time, especially when you stay consistent. You can get the most complete view of your credit score with Sesame Grade now.

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Disclaimer: The article and information provided here are for informational purposes only and are not intended as a substitute for professional advice.

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What is happening in May 2025?

Federal student loan payments officially resumed in October 2023, following a pause that began in March 2020. The U.S. Department of Education introduced a one-year on-ramp period, running from October 1, 2023, through September 30, 2024. During this time, missed payments would not be reported to credit bureaus, and borrowers would not be considered delinquent or placed in default. However, this protection ended on October 1, 2024. Since then, missed payments have been reported and borrowers have been at risk of falling into default.

In an April 2025 press release, the Department announced that active collections on defaulted federal loans — including wage garnishment and tax refund seizure — would resume on May 5, 2025. This marks the first time since March 2020 that such collections have been enforced.

What does it mean to be in default?

A federal student loan is considered in default when a borrower has not made a payment for 270 days. This can lead to serious consequences, including damaged credit, wage garnishment, tax refund seizure, and reduced eligibility for additional federal aid. Private student loans may have different default timelines and consequences, but the financial impact can be just as severe.

Borrowers in default often face barriers to accessing credit or qualifying for favorable loan terms. A default status appears on a credit report and can significantly lower a borrower’s credit score, potentially affecting their ability to rent housing, secure employment, or obtain insurance.

Who is most affected?

Although student loan default may be associated with recent graduates, many borrowers in default are older adults. According to Education Data Initiative, the average student loan debt among borrowers aged 35 to 49 is over $43,000, and this group carries one of the highest default rates. Defaulted borrowers are often juggling family expenses, mortgage payments, and other forms of debt.

Many of these borrowers are already under financial strain from inflation, rising interest rates, or job instability. Conditions that have only intensified since repayments resumed. With the protections of the on-ramp period now expired, the risk of involuntary collections steadily increases.

How might collections be enforced?

Defaulted federal loans may now be subject to involuntary collection actions, including:

• Wage garnishment. Up to 15 percent of a borrower’s disposable pay may be withheld.
• Tax refund offset. The federal government can withhold tax refunds to cover defaulted loans.
• Social Security benefit reduction. Up to 15 percent of benefits may be taken to repay federal student debt.

For borrowers who have not taken steps to resolve their default, these actions may resume with little warning.

How can borrowers get out of default?

Avoiding or ending collections is often a top priority for borrowers in default. Depending on the loan and individual circumstances, there may be ways to resolve the default and stop or prevent wage garnishment, tax refund offset, or other consequences. Possible options include:

• Loan rehabilitation. Borrowers may qualify to make nine reduced, on-time monthly payments in a ten-month period. Successful completion removes the default from their credit history, though late payments will remain.
• Loan consolidation. This allows borrowers to combine one or more federal loans into a new loan, immediately removing the loans from default if they agree to an income-driven repayment plan.
• Income-driven repayment (IDR) plans. These may offer lower monthly payments based on income and family size. Enrollment in an IDR plan may help prevent future delinquency or default.

Borrowers should carefully compare these options. Rehabilitation can only be used once, while consolidation may offer faster relief but does not remove the record of default from credit reports.

How might default affect credit scores and access to credit?

When a federal student loan goes into default, the missed payments and any collection activity are typically reported to the major credit bureaus. This can lead to a significant drop in a borrower’s credit score, especially if the default is not resolved quickly. Lower scores can make it more difficult to qualify for new credit, and may result in higher interest rates or less favorable loan terms.

If credit has been affected, monitoring it regularly can help borrowers track any changes, dispute errors, and detect signs of identity theft. Some credit monitoring tools also show how actions like loan rehabilitation or consolidation might influence a credit score over time. Some services may also offer alerts or tools to simulate how actions like rehabilitation or consolidation could affect credit scores.

Where can borrowers find help?

Student loan borrowers in default may benefit from contacting their loan servicer or the U.S. Department of Education to explore available options. Free assistance is also available through:

• Federal Student Aid: Default
• National Consumer Law Center
• Consumer Financial Protection Bureau

Borrowers are wise to avoid debt relief companies that charge upfront fees or make unrealistic promises. Legitimate help is available at no cost through federal resources and nonprofit organizations.

What to consider moving forward

Defaulting on a student loan can have long-lasting financial consequences, but taking informed steps may help borrowers regain stability. It may take time to rebuild credit and reduce debt, but resolution options like rehabilitation and consolidation could offer a starting point.

Understanding how default affects credit and financial opportunities is essential for anyone facing collections in 2025. Staying informed, monitoring credit, and seeking trusted guidance may support long-term recovery.

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Consumer credit habits in 2025 reflect growing financial anxiety

In early 2025, signs of economic stress are beginning to show in household credit behavior. With inflation still high and the U.S. economy contracting slightly in the first quarter of the year, consumers are adjusting how they spend, save, and borrow. These changes are visible in everything from rising credit card delinquencies to shrinking loan applications and growing emergency fund activity.

Lenders and analysts are watching these shifts closely, as they reflect not only financial caution but also the potential for deeper instability in the credit markets.

Credit card balances remain high while payments slow

Total U.S. credit card balances reached $1.13 trillion at the end of 2024, according to the Q4 2024 Household Debt and Credit Report from the Federal Reserve Bank of New York. What has changed is how consumers are managing that debt. A growing number of households only make minimum payments, a warning sign that many struggle to keep up.

Delinquency rates also increased. The report shows that 3.5 percent of credit card debt was at least 30 days late in Q4 2024, up from 2.6 percent a year earlier. Rising interest costs and inflation-driven budget strain are key factors.

Fewer new credit applications signal borrower hesitation

Many Americans are thinking twice before taking on new debt. According to the January 2025 Senior Loan Officer Opinion Survey from the Federal Reserve, demand for credit cards and auto loans declined throughout the second half of 2024.

At the same time, banks are tightening lending standards, anticipating more credit risk ahead. This combination is shifting consumer credit habits toward more conservative borrowing and reduced reliance on financing for non-essential purchases.

High interest rates are shaping everyday decisions

With the Federal Reserve maintaining elevated interest rates, the average credit card APR is hovering around 21.6 percent, according to the March 2025 G.19 Consumer Credit Report from the Federal Reserve. The high cost of borrowing is pushing many consumers to rethink how they use credit, particularly for everyday expenses.

Some opt for balance transfer cards, personal loans, or other forms of lower-cost debt to manage existing balances. Others are cutting back on credit use altogether in favor of budgeting or seeking support from family members.

Economic uncertainty is driving defensive financial behavior

Fears of a mid-2025 recession are affecting how Americans handle money. According to a recent MarketWatch article, more than half of Americans report that their financial situation is worsening, and many are delaying large purchases such as homes and cars. Additionally, a Redfin survey cited in the same article indicates that about one in four Americans are canceling plans to make big purchases due to economic uncertainty.

Emergency savings accounts may be gaining renewed attention as more households brace for economic instability. Consumers concerned about job security or rising expenses may focus on protecting their credit scores by paying on time and keeping credit utilization low. Some may also turn to free credit monitoring tools as a way to catch early signs of financial trouble.

What to do if your credit habits need a reset

If managing your debt feels more difficult in 2025, it may be time to take action. Consider these strategies:

• Pay more than the minimum whenever possible to reduce interest charges.
• Review your monthly budget and look for places to cut back.
• Check your credit reports regularly to monitor for errors or fraud.
• Explore debt consolidation options that offer lower interest rates.
• Use tools from services like Credit Sesame to track your credit and stay informed.

Use smarter credit habits to stay one step ahead

Consumer credit habits in 2025 are shifting toward caution, but caution does not mean standing still. As borrowing slows and delinquencies climb, staying informed and acting early can make all the difference. By building flexibility into your budget, using credit selectively, and monitoring your score, you may be better positioned to face financial surprises without falling behind.

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Student loan collections resume in 2025

Federal student loan collections are back. As of May 5, 2025, the U.S. Department of Education is resuming collections on defaulted loans for the first time since the pandemic-era pause began in 2020. For the 5.3 million Americans currently in default, this shift could have significant consequences, particularly for their credit scores.

Although payments officially resumed in October 2023, borrowers were given a 12-month “on-ramp” period, which extended through September 2024. During that time, missed payments were not reported to credit bureaus, and collections were paused. That cushion is ending early for those already in default. As of May 2025, active collections — including wage garnishment and tax refund seizures — are starting again.

This is the formal end of a major COVID-era relief policy that had protected millions of borrowers from aggressive debt collection. The Washington Post reports that this change could impact nearly a quarter of all federal student loan holders.

One tool being reinstated is the Treasury Offset Program, which allows the federal government to collect overdue student loans by seizing tax refunds, garnishing wages, and reducing Social Security payments. Business Insider confirms that garnishments may begin this summer for borrowers who take no action.

According to TIME reporting, the renewed collection effort reflects a policy shift under the Trump administration, which has prioritized fiscal accountability and a return to pre-pandemic enforcement.

Credit scores may take a hit

Once collections resume, many borrowers in default may experience a significant drop in their credit scores. According to the Federal Reserve Bank of New York, millions could experience major declines once missed payments are reported to the credit bureaus.

• Borrowers with excellent credit (above 760) may lose over 170 points.
• Those in the prime range (660–719) could see drops of 140 to 160 points.
• Subprime borrowers may lose an average of 87 points.

A change of that magnitude can have a dramatic impact on your financial standing, making it more difficult or expensive to access credit.

Default status may delay major financial goals

Student loan defaults don’t just affect borrowing. They may also interfere with efforts to:

• Rent an apartment or home.
• Secure a car loan or mortgage.
• Apply for new credit cards.
• Qualify for jobs that require a review of your credit history.

Since credit is used in so many areas of financial and personal life, the effects of default can extend far beyond the loan itself.

What can borrowers do now?

There are ways to resolve defaulted loans and potentially reduce the long-term impact on your credit.

• Loan rehabilitation. This program allows borrowers to make nine voluntary, on-time monthly payments over a period of ten months. Once completed, the default status is removed from your credit report; however, previous late payments may still appear. Business Insider explains that this option may help protect borrowers from garnishment if acted on soon.
• Loan consolidation. Borrowers can combine their defaulted loans into a new Direct Consolidation Loan. This process helps to get you out of default, but does not erase the default mark from your credit report.
• Income-driven repayment (IDR). Borrowers may apply for plans based on income and family size. These plans do not remove a default, but they may help prevent future delinquencies and reduce financial pressure.

Check your loan status and act quickly

If you’re unsure about the status of your loan, begin by logging into StudentAid.gov to check your current status. If your loan is already in default, your servicer can walk you through next steps, including options like rehabilitation or consolidation.

NPR reports that the Department of Education plans to begin sending garnishment notices this summer. Borrowers will have a 30-day window to take action before those collection efforts begin.

Stay alert as collections resume

As collections restart, it’s a good idea to keep an eye on your credit report. Changes to your loan status, new delinquencies, or defaults could begin appearing as soon as servicers resume reporting. Reviewing your credit reports regularly can help you identify issues early and dispute any inaccuracies.

You’re entitled to one free annual report from each of the three major bureaus, Experian, Equifax, and TransUnion, through AnnualCreditReport.com. During periods of financial stress or federal policy changes, free access may be extended, so check the site for updates.

You may also like to try Sesame Grade for a comprehensive overview of your credit score, including the factors behind the numbers and clear actions to reach your goals.

What student loan collections may mean for you

Student loan collections are resuming, and for millions of borrowers, this could result in a significant decline in credit score and reduced access to financial opportunities. Defaults may affect not just loans and credit cards, but also housing, employment, and insurance options.

If your loan is in default, there may still be time to act before collections begin. Check your status, explore repayment or rehabilitation options, and stay alert for any notices from your loan servicer. Taking early steps could help limit long-term financial consequences.

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