5 Strategies To Build up Good Credit History

Bad credit helps keep you from purchasing a house, funding your schooling, and in many cases from finding a job. This is exactly why it’s extremely important to establish good credit history.

Beginning with your first credit card, anything you do that involves credit becomes a portion of your credit history. To have a good credit standing, you must use credit properly. But what counts as using credit properly?

1. Don’t charge more than you can afford

When you get into the practice of charging only what you are able pay for, it lets potential financial institutions and creditors know that you are a responsible borrower. Its better to get a loan and get new credit when you demonstrate that you understand how to only borrow what you are able to repay. Not just that, only charging what you can afford helps you prevent unnecessary debt.

2. Don’t use all your available credit

Maxing out your credit cards – or even coming close – is one of the most irresponsible ways of using credit. Because the chances are that you’ll have a hard time paying back a maxed out balance as well as the additional fees that lenders charge. Lenders know that borrowers who max out their cards often have difficulty repaying what they’ve borrowed. Staying below 50% of your credit limit is wise, below 30% is best.

3. Don’t start with multiple credit cards

Many first time credit users make the mistake of collecting many different credit cards within their first few years of using credit. That’s bad. Because naturally the more credit you have, the more you’ll end up using. Before you apply for new credit cards, learn how to handle what you have first.

Also, everytime that you apply for credit, creditors check your credit report and if you have too many ‘credit checks’ within a short period of time lender’s tend to see you as a high risk user. This is why it’s important to stick with just one card for the first few years while you’re trying to build up your credit.

4. Pay your balance in full and on time

If you’re only charging what you can afford to pay, this won’t be a problem. And paying your balances off each and every month in full shows your lenders and creditors that you’re capable of paying your bills and handling your debts, which is something they want to see from you as a user. Since a large part of your credit score includes timeliness of your payments, paying your balances on time improves your credit.

5. Carry a balance the right way

Carrying a credit card balance isn’t bad as long as you do it the right way. If you can, make more than the minimum monthly payment to redue your balance as quickly as possible over the shortest period of time. Do your best to avoid making late payments on your credit card and keep your balances reasonable if you can. If you follow these principles, carrying a balance won’t hurt your credit.

If you follow the 5 tips above, you’ll have no problem establishing good credit with your lenders and you can almost guarantee that you’ll never be turned down for a credit application because lenders will see you as a responsible credit user.