Building Good Credit

Some tips to help you build and maintain good credit.

Having good credit is essential today. Bad credit can keep you from doing and having things such as driving/owning a vehicle without paying large down payments, high monthly payments, and high interest rates. It can also stop you from purchasing a home and even getting a job. Some employers check your credit history and will likely hire a candidate with the same qualifications but a better credit score. Trust me, I know all too well the struggles of having bad credit.

Building good credit early is very important and can make a huge difference in the quality of your life.

Tip #1 - Start with one credit card

Don't make the mistake of opening too many credit accounts too soon. Too many inquiries and new accounts can affect your score negatively. Also no matter what you tell yourself or how disciplined you believe yourself to be, the more credit you have the more you'll end up using. That can make it hard to keep up with monthly payments , getting those balances down.

Tip #2 - Keep card usage minimal

You want to only spend what you can afford. Maxing out your credit cards gives creditors the impression that you are irresponsible. Keep your balance at a small percentage of your limit (under 30%).

Tip #3 - Make payments on time

Keep negative items from being added to your credit report by making on-time monthly payments. The truth is that most bills won't be reported to credit bureaus as long as you are paying them on time, however if you become delinquent in your payments, that will be reported 100% of the time

Tip #4 - Pay balances in full

If you are using your credit cards responsibly (charging only what you can afford to pay), you should try paying your full balance each month. Paying off your balance will show that you have a history and the capability of paying bills, this is what lenders and creditors look for. Please note that carrying a balance is not neccessarily a bad thing as long as you are paying more than the minimum due.

Tip #5 - Let your accounts age

Always leave your oldest accounts open, they increase your credit age. The longer you have credit , the better for your score.

Don't neglect your credit

The best way overall to build good credit is to create healthy spending habits and to pay attention. Make sure you are checking your credit often for inaccuracies. (Sign up for credit monitoring here )

Everything that you do involving your credit becomes part of your history. Keep in mind when applying for cards and loans, that no matter how much you are approved for you want to only borrow or spend what you can truly afford, otherwise you can get yourself into debt and credit trouble rather quickly. The key to good credit is great utilization.