Many people are interested in how to build credit. This may include wanting to take out a mortgage or financing a vehicle. Having good credit makes these things easier to achieve and can lead to other advantages. Credit is important to the way you live your life. You cannot make good decisions or accomplish things without it.
But building credit score can be complicated. There are many different factors that go into establishing a good credit score. If you don’t know how to read a credit report, what good is it to you to know? How do you get the best value for your money in building a credit score?
How to build good credit begins with understanding what makes a good score. A credit score is a number arrived at by comparing how much a loan will be based on the information contained in your credit report and your payment history with other creditors. The best part is it can be improved over time. You have to be actively trying to improve your score.
One way how to build good credit scores is to avoid paying off too many debts. All outstanding debt should be paid off. Paying off credit cards with a high balance reduces your overall score. When paying off debt, make sure you don’t just close the account. Always make available payment to the creditor.
Another way how to build credit scores is to manage existing credit properly. Don’t keep multiple credit cards open. Close them as soon as possible and don’t open new ones unless absolutely necessary. If you are able to keep your old accounts open and active, keep them active. New credit cards will only get transferred to your name if you cancel your old accounts. Keep track of accounts that may still be good to transfer to your name.
If you can’t keep your old accounts open but want to apply for credit cards, be sure to pay on time. Late payments hurt your score even more than paying on time. Any kind of collection activity is a big negative and accounts could be removed from your report. Keep any paid up but dormant accounts as best you can.
Maintain healthy accounts with low balances. This shows lenders that you’re responsible with credit. Also be sure to pay all of your bills on time. Some lenders actually look at delinquent status as a warning sign to watch out for. This is why being diligent with paying bills helps you get approved faster. It shows you’re a reputable person and this will further improve your score.
When it comes down to how to build credit score, there are just a few other very important factors that should be covered. The most important thing is to keep your older credit accounts open so you don’t start building a new credit file. You can also continue to get credit cards and loans when you need them and have the money. Be patient and try to avoid negative things that may slow you down.
Get started building your credit today. You can find many good credit guides online that will help point you in the right direction. If you’re not sure how to proceed, you can speak with a credit counselor or even a financial planner. Both can give you advice on the best options. They can also assist you with setting up your credit. Just make sure they know exactly what you’re trying to do.
Open new accounts with credit card companies that accept your type of account. If you already have one open, this is fine. It only takes a few minutes to sign the papers but it’s something you can’t ignore. Eventually those new lines of credit you set up will add up.
Don’t open more than one credit card. Use them all at once and pay off the balances quickly. This will show the credit agencies that you have the discipline to handle credit. Don’t go overboard and get new credit cards just because you want to. You’ll be looking for ways to pay it off soon.
Paying off your old accounts is important, too. Many consumers think that this counts as being ‘active’ on their part, which helps your rating. Don’t open new accounts either. Just pay off your current accounts. This gives you some room to breathe and shows the credit bureaus that you’re taking control of how to build credit.
