Credit card tips for major life milestones: From college to retirement

Good credit habits are important for achieving life’s goals, especially during major milestones. Learn how to leverage credit during the key moments of your life so you can reap a lifetime of financial rewards and opportunities.

Introduction to credit cards

Before you dive into the world of credit cards, it’s important to understand how they work and why they matter for your financial future. A credit card isn’t just a tool for online shopping or covering unexpected expenses—it’s also a powerful way to start building your credit history. Every time you use your credit card and make on-time payments, you’re taking steps toward a good credit score. This score is crucial when you want to qualify for a loan, secure lower interest rates, or unlock valuable credit card rewards.

There are many types of credit cards available, from basic cards to those that offer cash back or travel perks. As a beginner, focus on learning the basics: always pay at least the minimum due by the billing cycle deadline, keep your balance low compared to your credit limit, and check your credit report regularly to track your progress. By developing good credit habits early, you’ll set yourself up for better financial opportunities and more favorable terms from credit card issuers and lenders down the road.

Starting college

Challenge: Learning the credit ropes

Starting out on the right financial footing can give you a strong foundation to build on, however, in a 2024 Experian survey, 71% of Gen Zers and 70% of Millennials blamed their lack of credit know-how on missteps that have cost them $1,000 or more.

Common mistakes for students include late payments and missed payments, which can negatively impact their payment history and limit future credit opportunities.

While you might think putting off getting a credit card while you’re a student is wise, that approach can actually be more harmful since you need to build credit if you want to be approved for an apartment or an auto loan in the future.

Best approach: Ace credit 101 with a student credit card or secured card

If you sign up for a credit card when you turn 18, use it carefully, and pay in full every month on time to establish good credit. Two specific types of cards are perfect for getting started on this journey: student credit cards and secured credit cards.

The best college student credit cards typically have less stringent qualifications and start out with a lower credit limit (so you can’t get into too much trouble). For others, the best first credit card or credit-building credit cards may be a secured card. These require you to provide a security deposit, which acts as collateral and determines your credit limit. The goal with either of these card types is to make regular, on-time payments so you can eventually graduate to an unsecured product in a year or so.

 ➤  SEE MORE:Best credit cards for students

Establishing financial independence

Challenge: Taking control of your own finances

Gaining financial independence is a big deal, and it starts with understanding where your money goes. Creating a budget is your first step—track your income, set savings goals, and make sure you’re not spending more than you earn. The 50/30/20 rule is a simple way to get started: allocate 50% of your income to essentials, 30% to wants, and 20% to saving money and paying down debt. Prioritizing needs over wants and making smart choices about spending can help you avoid more debt and keep your financial situation on track.

Best approach: Use credit cards to build your credit and financial confidence

Credit cards can be a valuable tool for building your credit history and boosting your credit scores, especially when you’re just starting out. Consider applying for a student credit card or a secured credit card—these options are designed for people with limited or no credit history and can help you establish credit

Getting your first job or moving out

Challenge: Avoid overspending with expanded credit options

As your income increases and you build more credit, you’ll start getting higher credit limits and more credit offers. But just because you have available credit doesn’t mean you should use it all. Despite good intentions, having multiple card balances with high interest can quickly cause balances to get out of hand.

Best approach: Cultivate good habits

Making on-time payments is crucial for maintaining a solid credit score, and keeping balances low is equally important. To make sure you’re not late, set up an automated payment for the minimum amount due, and then log in to your account to make additional payments. Missing payment deadlines can result in late fees, which add to your debt and negatively impact your credit. Watching your balance matters because credit scores factor into your utilization ratio, which is how much you owe as compared to your total available credit. If you have a $2,000 limit and you owe $1,000, that means you are utilizing 50% of your credit line. Credit experts recommend staying below 30% and as close to 0% as possible.

 ➤  FREE TOOL:Credit utilization calculator

Moving in with a partner or getting married

Challenge: Joining finances

Learning how to manage joint finances is important once you’re in a serious relationship. With joint accounts, each person is on the hook for what the other does, and behavior will reflect on both credit scores. Even if you keep things separate, the shape of the other person’s credit could affect both of your lives moving forward (like if you want to apply for a mortgage together), so it’s important to be transparent and honest about finances.

Best approach: Stay (mostly) credit single

While couples sometimes use joint accounts for shared expenses and shared savings goals, when it comes to credit, keeping some accounts separate can protect both parties in case the relationship goes south. That’s not an endorsement of secret accounts since you should still be upfront about all spending and debt. But it’s smart to establish your own credit in your own name, and not have to worry that someone else’s activity could sabotage you.

That said, there could be some advantages to having a joint credit card or two. For example, if one partner has poor credit, they can piggyback off their partner’s account and with responsible management of that account, it can improve their credit score. You can also pool rewards.

 ➤  SEE MORE:What is the difference between a credit card joint account holder and an authorized user?

Having a baby

Challenge: Baby sticker shock

According to Baby Center, parents spend an average of $20,384 on baby-related items in the first year. Planning ahead can help new parents avoid having to rely on plastic to cover the unexpected costs.

Best approach: Look for opportunities to offset new expenses

Becoming a parent is a big lifestyle change, and as such, you might want to see if there are any credit products that align with the new types of spending you’ll be doing. For instance, some credit cards offer great cash back rewards for grocery or big box store purchases (might as well get rewarded for all those diapers!). In the months preceding the baby’s arrival, you should also rethink your budget and trim other expenses to make room for new costs. You can also try to spread out your purchases and stock up on key baby items so you’re not doing a ton of extra spending all at once.

Buying a home

Challenge: Getting your credit in tip-top shape

Your credit score probably matters most when you’re in the market for a home loan. Lenders look at your credit history, how timely you are in making your payments, and what your debt load is compared to your availability of credit. The better your credit score, the lower your interest rate offer, and that can translate into tens of thousands in savings over the course of a mortgage.

Best approach: Get dialed into your credit reports

In addition to learning how to check your credit score, you should also review your full credit reports at least a few months before you start home shopping. First, work with the credit bureaus (Experian, Equifax, and TransUnion) to fix any errors and see how you can get any negative items you may have removed. Be sure to look for any negative information, such as inaccurate or fraudulent details, and dispute them to improve your credit standing. As for how to increase credit score, continue to make all your payments on time, and if you’re carrying debt and have a little money to pay it off, consider doing so to give your credit score a boost. In the meantime, refrain from signing up for a new credit card, buying a new car, or financing furniture right before you apply for a mortgage.

Changing jobs or career paths

Challenge: Income uncertainty

Changing jobs or career paths could mean a transition period in which you may be making less income for a while. It’s wise to scale back on using credit during this period because adding to your debt could create more financial stress.

Best approach: Leverage no interest offers

In addition to bulking up your emergency savings in the period leading up to a career change, as a backup, you might consider opening a new 0% APR credit card. The keyword here is backup. Don’t do this as an excuse to keep spending, but instead, know that it’s there if you have to cover an unexpected expense. Because you’ll have a year or more (depending on the card) to pay it back without interest charges, it can allow for some wiggle room.

Preparing for retirement

Challenge: Staying on top of credit health

There is no retirement age when it comes to credit responsibility, but many retirees slack off when it comes to monitoring their credit reports and credit health. Considering that fraud rose by 14% among the elderly population from 2022 to 2023, according to the FBI’s Internet Crime Complaint Center, keeping tabs is important.

Best approach: Monitor accounts regularly

Create a calendar reminder to check your credit reports every couple of months, and take a peek at your main banking and credit accounts regularly. At the very least, you should be looking over your monthly statements. You can also set up text or email alerts for transactions so you’ll have a heads up on any fraudulent activity.

 ➤  SEE MORE:How to get your credit ready for retirement

Unexpected life events

Challenge: Difficulty making monthly payments

When life happens, like divorce, medical issues, or a layoff, staying afloat financially can become challenging. During these periods, you can lean on your emergency fund if you have one. But once you’re relying on credit to cover your living expenses, the bills can grow quickly.

Best approach: Don’t hide from your creditors

If you’re facing a temporary financial setback that will last a few months or more, getting on the phone with your credit card companies might help. You may qualify for a hardship program that reduces your monthly amount due or lowers your interest rate, for example. You could also reach out to a nonprofit credit counseling agency for a free consultation to go over your options.

How to maximize your credit potential during each stage

Your credit journey will evolve over time, and will most likely have ups and downs. What’s most important is to keep educating yourself about credit card debt management strategies (if needed), and finding products that best match your needs throughout various life stages. Monitoring your credit activity and maintaining a healthy credit mix can help improve your credit score. Additionally, choosing a reputable card issuer is important, as their reporting practices and account management can affect your credit standing.

The bottom line

Credit cards can be excellent tools to help you manage your cash flow through life’s milestones, and even save money if you maximize rewards. The key is staying in the know about your finances and using your credit responsibly.