5 Tips For Building Good Credit

Establishing and maintaining a healthy credit record is an important aspect of your financial life. Your credit score is a number that reflects what is in your report that lenders use to determine your risk factor. When it comes time to buy a car, house, or even look for a job, your credit report and score plays a huge role in the process.

If you have a great credit score, lenders are eager to offer you a line of credit with low interest rates. On the flip side, poor credit history makes finding lenders more difficult, and ones that are willing to lend usually carry steep interest rates.

Additionally, employers often check a potential hire’s credit report for payment history and negative marks to determine someone’s reliability and financial decision making.

It is vital then to understand how to build and keep a solid track record of your credit. Without a consistent history, lenders will be unable to gauge how you will handle repaying a debt.

Let’s take a look at 5 easy ways you can build good credit and boost your credit score:

(And make sure you stick around for the 6th Bonus tip!)

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#1: Start Small

Life is unexpected, and things will come up where having a good report and score will help you out tremendously. That’s why it’s a good idea to plan ahead by starting to work on your credit now.

A good place to start is by applying for a beginner credit card. There are many options available, but if you don’t have any credit history expect your spending limit to be very low and your APR to be relatively high. However, don’t be discouraged– once you prove you can stay within your limit and make your payments on time, credit card issuers usually up your credit limits within a few months.

Still, it’s important to keep your balance paid off each month, and not to exceed around 15%-30% of your limit per cycle. This will show that you’re responsible and you won’t go spend-crazy when they up your limit substantially.

#2: Set Up Auto Pay For Recurring Bills

Payment history is critical for keeping a healthy credit record. Having just one late payment reflected on your credit report can greatly impact your credit score.

With so many recurring payments these days, it’s hard to keep track of them all some times. That’s why setting up auto pay for monthly bills is a no-brainier for making all of your payments on time.

While it may be hard if you’re on a tight budget to have payments automatically drafted from your account, it’s good to expect these bills as “money already spent” and start planning a new budget with what you know is left over. Just make sure the money is in your account to avoid being charged overdraft fees.

PRO TIP: When setting up auto pay, opt to use your bank info with your routing/account number instead of using a checking card. You’ll forget about it after a while, but if you used a card initially and it expires, you’ll need to update it- and worse, you might let a payment slip through if it can’t be charged.

#3: Keep Credit Card Balances Low

It is a good idea to keep your credit utilization low, relative to your total limits.

A good range is 15%-30% of what you’re allowed. That means if you have a $1,000 limit on your credit card, you carry a month to month balance of $300 or less.

Your credit utilization is recorded in your credit report for each account that you have open. Keeping this in check will show anyone that pulls your credit report that you are being responsible with your finances.

#4: Keep You Oldest Credit Card Active

Another great tip as your credit history matures is to keep your oldest account open and active.

Your length, or age, of credit is another factor going into generating a credit score. An account with a longer history looks much better than one that has only been open for a month, so keep your old credit card open.

Just be aware, however, some card issuers close out inactive accounts, so even if it means you have to put a small charge on it every now and then, do it to keep it open. Just make sure to pay it off. It actually will lower your credit score to have your oldest account removed, since it lowers your total average age of your accounts.

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#5: Know What Is In Your Credit Report

In order to achieve your financial goals, you need the right tools. That’s why being aware of what’s in your credit report, as well as your current credit score, is your greatest asset when it comes to building and maintaining your credit.

If you are looking for a new apartment, shopping for a car, or applying for a job, all of these institutions will be looking into your credit report to make their decision. You don’t want to be sitting at the car dealership as they review your credit report and say, “uh oh”.

Knowing beforehand gives you the upper hand in shopping around, and there’s less disappointment if you’re denied because of something you didn’t know was in your report.

What is great about when you pull your credit report and scores is that it’s a very easy process to complete a quick form, then you can instantly get access to everything a lender would see.

There are many sites available to pull your credit report but we recommend you get your report and score from Credit Hero. You can pull your report and score through them and get credit monitoring for $1. If you cancel the credit monitoring before the 7 day trial period you won’t be charged.

Being familiar with what’s in your credit report gives you the reference point to start working on building great credit history using the tips mentioned above.

BONUS TIP: Get Started Early

Getting a head start on building your credit is essential.

By taking small steps early on, you can start to fill out your credit report with positive factors that all add up to make you a risk-free borrower.

If you need to get your report and score head over to Credit Hero, then start working on resolving any negative aspects you find on your report. It will save you a lot of time down the road.

Happy crediting!