Building good credit and maintaining it is kind of like running a marathon – it takes time, patience, and perseverance. But it’s worth it in the end.
Having good credit can make it easier for you to get a personal loan or a home mortgage and it can qualify you to receive lower interest rates. Here are some of the things you can do to help build a strong credit history:
- Pay your bills on time, and always pay at least the minimum amounts required. To avoid forgetting when bills are due, take advantage of online bill pay services that allow you to set up automatic withdrawals. Such services are available through many banks and other financial institutions. At the very least, set up reminders via your phone or email calendar to alert you when bills need to be paid.
- If you’ve already missed paying a bill, catch up as soon as you can!
- Don’t apply for credit cards you don’t need. Recent credit activity is reflected in credit scores, especially if you apply for a significant amount of credit over a short period of time. This type of activity may lead lenders to believe that you are experiencing economic turmoil.
- Avoid maxing out your credit limit. Financial experts recommend keeping your credit balance at 30 percent or less of your total credit limit.
- Keep in mind that the amount you charge on your credit cards is factored into your credit score, even if you pay off the entire card balance each month. So, beware of using most of your available credit each month, even if you’re going to pay it off, as this can negatively impact your credit score.
- Closing credit card accounts won’t necessarily have a positive impact on your credit score, particularly if you transfer most or all of your credit card balances to one card.
- Give it time! Having a long, solid credit history will help increase your credit score, since credit scores are based in large part on experience over time. Look at it this way: a lender may consider you to be a good credit risk if you have a history of paying your bills on time over the course of several years.
- Check your credit reports at least annually to ensure the information in them is correct. You can obtain a free copy of your report once a year from each of the three nationwide credit reporting companies at www.annualcreditreport.com. If you discover inaccuracies in any of the reports, don’t hesitate to dispute the information with the credit reporting company involved. Misinformation that is not addressed could negatively impact your credit score.
Putting in hard work now to build a good credit history can help you down the road when you’re looking to take out a loan, or refinance an existing one. And remember that achieving and maintaining a good credit score calls for staying the course over a long period of time, not approaching it as a sprint!