Good credit tells lenders that you are a low-risk person who manages their credit and financial situations wisely. When you establish a good credit history, you will enjoy lower interest rates, lower minimum payments, less paperwork and more lending options. Poor decisions can lead to years of paying higher minimums and higher interest, forcing you to hold your balances for longer and longer. You can be denied jobs, car loans, and pay auto insurance rates over 200% higher than someone with a high rating. Those who manage their credit well enjoy lower limits, more freedom of which instruments they choose and can pay off balances more quickly. In general, having good credit saves you money.

What does your credit score include? When you are establishing your credit, you may wonder what the credit agencies are actually looking for. Generally, they start out with your name, social security number, employers, current and past addresses, and your marital status. When someone gets your credit report, it includes things like when you make payments to your utility bills. Paying a bill late can stay on your credit history for years. Things that you might not imagine would affect your score can be heavily weighted when determining how high of a risk you are. They look at whether you own or rent, how long you have lived at the same address, what your occupation is and how many years you have you been at your current job.

They look at your financial situation as well. They will see how many credit cards and loans you have, if you have made any late payments and how many years have you had a credit history. Eight or more years of credit history is preferred, so get started as early in your life as possible. Don’t let your debt add up to over 15% of your income. Don’t let your balance get up to 50% of your available credit on credit cards.

Keep the number of inquiries on your credit low. You should take a look at your own credit report once a year to make sure there are not any mistakes on it. One inquiry does not hurt you, but multiple inquiries can significantly impact your score. Even two inquiries can lower your score by eight points.

Building good credit takes time, effort and maybe some sacrifices. Start early building your net worth. Having a checking and a savings account earns you a score four times higher in that area than a checking account alone. Use direct deposit. Set up an automatic savings plan, no matter how small of an amount is being contributed. Take advantage and invest heavily in your employer’s retirement plan.

Organize your budget and don’t ever charge luxuries. Pay your credit cards before the due date and always pay more than the minimum. Pay your bills on-time, every time. If you realize that you are going to have to pay a bill late, don’t settle on paying a late fee and forgetting about it. That one late payment will be on your credit report for a long time.

One option may be to utilize something short-term which can actually help build your credit instead of hurting it. A payday loan can be obtained quickly and easily, usually within one business day, online. A cash advance can help you make your bill payments by the due date, but also establish a good credit history when you pay it off on-time.