Tips to Build Your Credit Score

tips to build your credit scoreCredit scores are incredibly important these days.  While some may think that credit scores are only used when purchasing something with credit, that is simply not entirely true.  Having a good credit score can affect your insurance premiums, if you can rent an apartment, if you can get a job, along with paying cheaper rates when you finance.  You can get big savings when you buy a home or car with credit just based on your credit score.  If you don’t have any credit or need to get a better credit score, then here are some ways that you can build your credit.

Credit scores are calculated off a number of different factors.  They include your payment history, how long you have had credit, how much you owe on credit compared to your available credit, how many times you have applied for new credit, and the types of credit used.  These are the factors that you need to focus on in order to build your credit.

Financial Check

The true first step to building your credit is by looking over your finances.  Are you in debt?  Are you just paying the minimum balance on your credit payments?  Can you afford what you are purchasing?  Do you have any late payments?  These are just a few of the questions that need to be asked when you check over your finances.  You should also check your credit report, which can be done for free each year, to make sure there are no errors.

Pay Down Debt

If you have any debt that you owe, then it is essential to pay it down.  If you have revolving credit, like credit cards, then those should be the first on your list.  Credit rating agencies like to see you have little owed on your credit cards.  No matter if you have a mortgage, student loans, car loans, or credit cards, you have to pay them down.

Actually Use Credit

If you don’t have credit, then in order to get it, you have to use credit. You can’t build your credit without it.  They key is to just start small.  Get a major credit card and use it for a few small purchases every month.  You should always pay off the balance each month, so you won’t incur interest.  If you have bad credit, then think about a secured credit card, which requires a deposit in order to use.  Use it slowly and make on-time payments.

Automate Payments

Late payments are bad for your credit score.  In order to build or rebuild your credit, you need to make on-time payments. Set up automated payments to make sure you never miss one payment.

When building your credit, you need to realize that it will not happen overnight.  It takes time to see your changes go through the system.  Your credit score will rise when you use credit wisely and pay down your debt.  There are no true quick fixes to build your credit and increase your credit score.

Readers: Have you ever had a problem with your credit? What steps did you take to correct the problem?

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