Finances

Tips for Building Credit

Why is credit so important? It allows us to purchase necessities in our lives such as cars for transportation and homes for our families. The better our credit the more affordable these necessities become. Whether you have good credit, bad credit or no credit at all, below are some tips that you might be able to utilize to build or maintain your credit.

  • Credit Score – Start out by checking your credit score to see what your current rating is. You should check your credit score at least once a year because just like our life changes, our credit score changes, as well.
  • Pay down your credit card balance – Keeping your credit card balance low shows that you are not living off of credit. Keep your credit card balance low and if at all possible, try to carry no balance at all. A credit card is a tool that you can control (you control how much you use it and how much of the balance you pay) so use it wisely.
  • Keep your credit utilization low – Credit utilization is how much of your credit limit you are using. This item relates to keeping your credit card balance down. It is often recommended that your credit utilization should be at 30%.
  • Pay your bills on time – This shows that you pay your debt and that you are responsible for the debt you incur. Having late payments and bills that go into collections will reflect negatively on your credit score so make sure that you are making your payments on-time.

Remember that building credit takes time. A credit score is a reflection of past activities over time. The best way to ensure that you are building/maintaining a good credit rating is by showing that you can consistently pay your bills on time. Have patience with your credit score and over-time, it will improve.