Tips To Build Good Credit
If you’ve spent a long time trying to clear your bad credit, you’ll have a good idea of how long it might take to build up a good line of credit. It will take time, and you could easily fall into more debt if you’re not careful, but the results are worth the effort. A good credit score will help you get a good interest rate on your mortgage, loan repayments, and you can avoid security deposits on utilities. Here are a few suggestions to help you start building that good credit.
Apply for a credit card
It might not make much sense, especially if credit cards were the reason for your debt, but they are the easiest way of establishing good credit. Apply for a secured credit card and learn to use it responsibly. Keep your utilization rate below 10 percent, and pay back what you owe in full every month. You should also never take out more than one card because it reflects poorly on your credit report. You may justify your store cards because of the discount. However, the stores know that the majority of people do not pay off the balance in full each month, and they make a lot more in interest than they offer you in savings. Don’t give in to temptation.
Take advantage of the good credit you have
As stated above, having good credit gets you better rates on loans. If you’re in the market for a new car, use your credit to get yourself the best car loan interest rate available. Then, continue to build your good report by sticking to your repayment plan, or even paying off the loan early. Remember to only borrow what you can afford; this will make it easier to keep up with the repayments, and avoid falling back into debt.
Make your payments on time
Show lenders you’re a responsible borrower by paying them back in full and on time. Once you have your new credit card, use it to make small purchases, and then keep clearing the balance, thereby not being charged interest. To make it easier for you to make your repayments in full, never use your credit card to buy an item you won’t be able to pay off on time and in full each month. If you need further guidance; don’t charge something to your credit card that you wouldn’t pay cash for. The goal is to avoid maxing out your credit card, because lenders know that borrowers who max out their cards often have difficulty repaying what they’ve borrowed.
Keep your old accounts open
If you don’t use an old account, you might think it’s smart to close it and put it behind you. However, it’s better for your credit score if you let them age. Leaving your oldest accounts open helps increase your credit age and build good credit. After several years, the credit bureaus will eventually drop closed accounts from your credit report anyway.