A good credit history is essential in today's society. Traditionally, you only had to worry about having a good credit history for credit cards and large purchases such as home and automobiles. However, good credit is vital in even the smallest financial transactions, like getting your utilities turned on or establishing cellular phone service. When you don't have good credit, these service providers require you to pay a deposit to establish service. Start building a good credit history as early as possible to avoid paying hefty deposits.
Paying your bills on time is the easiest thing you can do to build a good credit history. Even bills that aren't credit cards should be paid on time. While utilities and similar bills aren't regularly included in your credit history, when unpaid, they can wind up on your credit report as a collection. Collections have a negative impact on your credit.
The timeliness that you pay your bills has the biggest impact on your credit history. When you are current on all your bills, lenders view you as less of a credit risk. This, in turn, will benefit you with lower interest rates than if you had delinquent payments in your credit history.
You don't have to pay the full amount of your credit card balances each month, but you do need to make at least the minimum payment. Any time you pay less than the minimum payment, the creditor reports your payment as being late for that month.
Always be aware of your credit limit and balance for your credit cards. Be careful that you don't go over your credit limit. When you exceed your credit limit, your creditor will charge an extra fee, in addition to your regularly scheduled payment. This extra fee can make it harder for you to make your minimum payment. Not only that, going over your credit limit will be included in your credit report. Future creditors will deem credit limit overages as an inability to handle credit.
If you have any credit cards that are not being used, and you don't anticipate using them, these should be cancelled. Make sure the balance of the card is complete paid off before cancelling the credit card to continue building a good credit history.
The truth is, with a little bit of discipline, it's very easy to build good credit without much effort at all. If you are short on time and money to build good credit, then here are 5 instant tips to building good credit and a good credit score.
1. Increase Your Credit Limits - did you know that you can easily call your credit card companies and ask for a credit limit increase? The point is to have a higher limit and instantly lower the percent of balances that you carry. The lower the credit card balance compared to the credit limit, the better for your credit score as credit balances count for 30% of your credit score.
2. Spread Out Your Balances - if you have a credit card that is maxed out and others that are paid off simply transfer part of the balance over to the other cards. What that means is that you wouldn't get hit from the credit agencies for having a maxed out card since you have now spread out the high balance over a series of cards.
3. Have Several Types Of Credit - part of building good credit is having a good mix of credit. The saying "Don't put all your eggs in one basket" definitely applies here. When it comes to your credit, having different types of credit is key. It's best to have credit cards, auto loans, mortgages, and other installments loans within your credit profile than just having one of these categories.
4. Pay On Time - this seems like the most obvious, but often is overlooked. Many people look for the magic bullet for building good credit; however, it's the simple things like paying your expenses on time that make the biggest impact. There's nothing better that you can do for your credit and credit score than paying on time each and every month.
5. Apply For New Credit With Caution - when you are seeking to get new credit, don't go into a credit application frenzy and apply for many different cards or loans all at once. Although they don't do as much damage as other credit factors, inquiries can cause your credit harm. Spread out the time that you apply for cards by a few months so that you don't have a lot of credit inquiries in a short amount of time.
As you can see, there are simple things that you can do regularly to build good credit. They don't take any money at all other than what you are already using to pay your bills. Aside from costing absolutely no money, each of these will only take you a few minutes and will guarantee that you build not only good credit but also a higher credit score.
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