Building Good Credit
Financial experts agree that building and maintaining good credit is an important part of modern living. For those who are just starting out, or for those who need to rebuild their credit, some tips might come in handy.
In order to establish some credit history you have to have some accounts. Experts suggest that you keep this down to a maximum of four. You should understand that any type of loan will qualify as for your credit history. It can be a student loan, car loan, credit card account, or just about anything else that is legal.
Once you have an account ( or a few accounts ) it is important that you use them wisely and that you follow some guidelines on payments.
If you have a credit card or charge account it is always a good idea to keep your charges down to below ten percent of the limit allowed. You want to do this because the software that determines your credit score will look favorably on this type of financial discipline. Generally speaking it is not a good idea to use credit cards for small items such as groceries or other things that you should pay cash for, but if you are just starting out you may want to use your card to purchase small ticket items so that you can pay off the balance at the end of the month. This will look good when it comes time to determine your credit score. It is much easier to pay off a smaller amount at the end of the month that it is to pay off a large ticket item.
One of themost important things you will do when establishing your credit is paying your bills on time. This means getting the payment to the lender before the due date. Late payments are the cause for most credit problems and lowered credit scores. Make it a habit to pay on time if not even early.
If you do not want to use credit cards or if you cannot get a credit card, you may want to open an account with a department store. Often these accounts are easier to get but do keep in mind that they also carry high interest rates if you carry over a balance. As with credit cards, keep your spending low and pay off the balance each month. Remember, you are trying to establish a good base for your credit score and late payments will kill that effort on the spot.