If a person wants to have a loan from financial institutions and banks he needs to have a good credit record. But for building a good credit record a person needs to have a well thought spending plan. If he buys things using his credit card and clears the dues in time it will result in a positive credit rating.

There are a number of things that go into the calculation of your credit score, and luckily there are methods of improving your score.

Use less of your available credit. If you have ?10,000 in available credit (the total maximum amount you could borrow on your existing accounts) and you've used ?9,000 of it, your credit score is going to be lower than someone who only used ?4,000 of his or her available limit. You should aim for using 25% or less of your available credit for the optimum debt to credit available ratio.

The most obvious way to improve your credit is to ensure you are making all of your payments on time. A creditor may report to the credit bureaus (such as Experian) the moment you are 30 days late making a payment, so it's in your best interest to keep your payments up to date. Often, if you have a low score due to late payments, making all payments on time for at least three months can result in a credit score that has increased by as much as 20 points.

Stop generating inquiries for new credit. Each time you apply for credit, that's considered an inquiry. Having too many inquiries will lower your score, particularly if your score is already in the average or low range to begin with! The shorter your credit history, too, the more an inquiry affects your score.

If you don't have any credit at all, you should consider a credit card or loan. Building your credit is easy if you don't have a history of making late payments to overcome. Simply charge some purchases on a credit card and pay it off in full each month. As the creditor reports your payments to the credit bureaus, you'll begin establishing a credit score (and a good one at that).