How to Build Your Credit

If you haven’t already read How to Build Credit History with Secured Loans and Establishing Credit History with Secured Credit Cards – start with them and come back here.

Maintaining a healthy credit report and a good credit score is an ongoing task. Remember that it’s much easier to keep your credit in good shape than to re-build it back from scratch.

The following tips should help you establish good credit history and maintain it for a long time:

Do’s

• Always pay on time. A single late payment will do a lot more damage than what 2 years of timely payments can fix.
• If you have missed a payment, get current and stay current. The sooner you can begin to manage your credit and pay on time, the sooner you will see your credit score improve.
• Pay your bills on time. All of them – utility, cellular, medical, rent. While these types of payments don’t generally show up on your credit report if you’re in good standing, they are likely to show up as a blemish if you’re late (usually after 30 days late). Just one can impact your credit score for up to 7 years.
• Keep your credit card balances low. If you cannot pay the balance at the end of the month, don’t keep charging it up until you’re able to pay them.
• Re-establish credit especially if you’ve had problems in the past. Getting back on track and showing the world that you are worthy of credit will raise your score in the long run.
• Check and monitor your credit report regularly. Pull your free annual credit report and check it.

Don’ts

• Don’t max your cards. Keep your credit balance below 35% of your limit.
• Don’t carry credit on your card. You do need to use credit if you want to build credit history, but “Using credit” is not the same as “carrying a balance on your credit cards.” Carrying a balance is expensive, bad for your finances and completely unnecessary. Always pay your statemens in full and avoid unnecessary high interest rates.
• Don’t open a bunch of credit cards or accounts that you don’t need.
• Don’t transfer credit card balances from one card to another. It’s better to simply pay them down and gradually pay them off.
• Don’t open a lot of new credit all at once especially if you are a new credit user. Rapid account build up looks risky if you are a new credit user.
• Don’t expect overnight results. Building credit and boosting your score takes time. There are no shortcuts.
• Don’t take credit just because you can. Credit is a useful tool, but it can also get you in trouble. After you build credit, you may be inundated with offers. Banks, credit card companies and others will want to lend you money because they know you’re a good borrower.

  Don’t take them up on every offer – only borrow money when it truly benefits you.