Credit scores affect your ability to get approved for loans, credit cards, and rental applications. Good credit can help you secure better interest rates and terms, while a poor credit score can lead to higher interest rates and limited financial options.
Building a Good Credit Score
Building a good score takes time and effort. Here are some steps to build your credit score:
Get a Credit Card
If you’re new to credit, apply for a secured credit card. This requires a security deposit to be used as collateral. Use your credit card responsibly by making small purchases and paying your balance in full and on time every month.
Pay Your Bills on Time
Late payments can hurt a credit score, so pay your bills on time every payment cycle. To assist with consistency, set up automatic payments or reminders.
Keep Your Credit Utilization Low
Credit utilization is the amount used compared to the total available credit. Low credit utilization (ideally below 30%) can help improve your credit score. Avoid overextending credit cards, and ensure you pay off your balance in full every month.
Monitor Your Credit Report
Regularly monitoring your credit report can help catch errors or fraudulent activity that could impact your credit score. You’re entitled to free credit reports from Equifax, Experian, and TransUnion annually. Take advantage of this service and review your information for accuracy.
Continue Making On-Time Payments
Making on-time payments is just as crucial for maintaining a good credit score as building one. Set up automatic reminders or autopay systems to ensure promptness.
Avoid Closing Old Credit Accounts
Closing old credit accounts can hurt your credit score, reducing your available credit and shortening your credit history. Instead, consider keeping your old tabs open and using them occasionally to keep them active.
Be Careful When Applying for New Credit
Applying for a credit card or loan temporarily impacts your credit score in a negative way. Try to limit your credit applications and only apply for credit when you need it.
Check Your Credit Score Regularly
Regularly checking your credit score will assist in spotting changes or issues impacting your credit. Several free credit monitoring services allow you to check your credit score and receive alerts when changes occur.
Build and maintain a strong credit score by getting a credit card, paying bills on time, and monitoring your credit report. Once you have a good credit score, continue making on-time payments, avoid closing old credit accounts, be careful when applying for new credit, and check your credit score regularly to maintain it. By following these tips, you can build and keep a good credit score and enjoy the benefits that come with it.