Practical Suggestions for Building Good Credit
Looking to build a good credit history? Not sure where to start? Good credit is attainable if you are willing to develop good credit habits!
Tips for First-time Credit Consumers
- Apply for a line of credit. You cannot establish your credit , without first applying and obtaining a credit card or line of credit. This credit account can be unsecured, secured or prepaid. The main thing to keep in mind is that it must report to the credit bureaus.
- Be responsible with your new credit accounts. You will see me repeat this over and over on this blog. Pay your bills on time! Get in the habit of paying on time and in full! After all, by paying your bills when they are due, you can avoid paying late payment penalties, huge interest charges and other pesky fines that are usually imposed on delinquent credit cardholders and borrowers.
- Have a variety of loans on your credit report. Once you have have been paying on your new line of credit for a minimum of 6 months. Approach your bank or credit union for a small personal loan. Your credit score will improve if you can show that you have experience in paying credit cards, installment loans, and a variety of other types of credit instruments.
- Don’t be afraid of secured lines of credit – If you are new to credit or rebuilding credit, security deposit requirements are pretty normal. Think of it this way. A bank will feel more secure in lending you money, knowing that they hold something of value, just encase you are unable to pay. I’ve also found that some banks give very good rates for secured lines, vs unsecured bad credit lines. What I mean is, the same person can apply for a secured line of credit and get it and the interest rate could be pretty low – somewhere around 12% (depending on the bank and your credit) . While that same person can choose to go the unsecured loan route and end up with an interest rate of 24.99%!
- Don’t go over your credit limit. Not only is this a sign of poor credit management, but they assign HUGE fees for going over. When the time comes to ask for a credit increase you want to show how you have behaved responsibly since obtaining the card. You don’t want them to have to consider how many times you went over your credit limit.
- Monitor your credit card statements. Be on the look out for fraudulent charges. We also recommend that you keep receipts and other relevant financial documents. These documents can serve as proof in case you stumble upon incorrect or outdated items on your credit card statement.
- Order copies of your credit report. You can order copies of your credit report from the three credit reporting agencies – Equifax, Experian and TransUnion, six months to one year from the time that you have applied for your lines of credit. This is important not only for you to determine your latest credit rating, but also to check the accuracy of the transactions listed on your credit file.
Should you encounter fraudulent or erroneous entries in your credit report, and then you need to immediately write and send letters of dispute to the credit bureaus.
Good credit isn’t out of your reach. These simple tips will help you build a good credit profile and get you in the habit of being a responsible credit user.