Top 10 Pointers on Building Good Credit
Is there a secret to building good credit? The truth is, everyone has the power of building good credit. Sometimes, people just forget about the important steps of building and maintaining good credit along the way. Here are the top 10 pointers on credit building that we all must remember:
1. Open a Savings Account. One way to establish good credit is by opening a savings account. Anyone can have their own savings account, even those below the legal age of 18. You don’t necessarily have to own a credit card right away in order to build credit. A bank savings account in your name is a good start.
2. Open a Department Store or Gas Station Card. A department store card or a gas station card doesn’t impose strict rules to get an approval. In fact, for people without a credit history, these cards are great stepping stones in building one. These cards work much like credit cards in a way that you can borrow credit from your account and pay your balances on a monthly basis. However, since these cards can only be used in exclusive gas stations and limited establishments, you can have more control with your spending and stay away from bad credit.
3. Understand your credit score. Your credit score will be based on two major things. The timeliness of your payments and the how much of your credit is used. However, other things can also have a negative effect on your score like submitting too many applications to different creditors. Understanding how your credit score is calculated will give a better idea on what to do and what not to do to keep your credit in good standing.
4. Don’t be late. Many consumers do not realize the value of paying their bills on time. Even if your credit card doesn’t charge you a high interest, that’s not an excuse to be late on your payments. Bear in mind that a single late payment will affect your credit score.
5. Don’t max out your credit. Aside from promptness, maxing out on your credit limit should be a big no. Ideally, a card holder should not spend more than 30% of his allowable credit if he wants to have an excellent credit score.
6. Pay your balances in full. Contrary to popular belief, leaving a balance on your account will not give you a higher credit score. But paying just the minimum amount of your balance puts you at more risk. You should always aim to pay off your balances in full as much as possible.
7. Get help from a co-signer. Finding a credit card with good rates is too difficult if you have bad credit or no credit at all. Still, with the help of a co-signer with excellent credit, it is possible for you to open a credit card or a loan without resorting to subprime lenders. However, keep in mind that your co-signer is accountable for your debts so be a responsible borrower.
8. Be vigilant on the use of your credit card. Every credit card holder must always be conscious on the use of credit cards. Charge only what you can afford to pay. Don’t get in the habit of using your credit card for purchases that you use to pay in cash. Always remember that credit cards can put you in bad credit in just one swipe.
9. Regularly check your billing statements. Awareness of your credit is crucial. Study your billing statements regularly to make sure that all charges in your account are correct. This will also help you take note of the due dates and pay your bills on time.
10. Budget your money. Finally, building good credit will depend on how you handle your money. Make sure that you are not spending more than what your monthly income allows. Aside from your personal needs and paying your creditors, don’t forget to allot a portion of your budget to your savings account and to your emergency fund. This way, in case unexpected events get in your way, you’ll be financially ready.