Credit cards are great—but only if you use them responsibly. A good credit score can help you get a better interest rate when buying a car or house, and it even helps in securing loans for small business owners. If you have bad credit, however, you might have to pay higher rates on certain financial products and services because lenders perceive your risk as being higher than someone with good credit. So what steps can you take to build up your credit score? Well, let’s start at the beginning:
Pay off your credit cards in full
The first step to achieving great credit is to pay off your credit cards in full every month. It’s the most important thing you can do, and it will have a huge impact on your score.
It’s easy to understand why this is so important: if you don’t pay off your balance each month, it means that the money owed stays on the account and continues to show up as a monthly payment obligation on reports–and that counts against your credit score! If you want to improve your score quickly and effectively (and who doesn’t?), then paying down debt fast should be at the top of your list of priorities.
Set up an auto-payment for your credit card bills on time.
- Set up an auto-payment for your credit card bills on time.
- Make sure you have enough money in your account to cover the payments. If not, set up a payment plan with the credit card company so that they don’t charge you late fees and interest charges for paying late.
Make sure to pay your utility bills on time.
Paying your utility bills on time is important for your credit score. If you don’t pay your utilities, it can affect the following:
- Late fees. If you’re late with a payment, some companies will charge a fee of $25 or more to cover their administrative costs of processing the late payment and sending out reminders. These charges vary from company to company but are generally in line with what banks charge for overdrafts or bounced checks (e.g., $35).
- Disconnection of service–or worse yet–having no access at all if there’s no money left in the account! Some companies will disconnect service if they receive just one missed payment; others wait until there are several missed payments before taking action against delinquent customers (and even then may give them time to catch up). Either way though it’s important not only because lack thereof could cause serious problems like heat loss during winter months but also because losing access means losing control over whether prices go up or down based on demand/supply factors within each market area served by particular power providers which might lead into higher costs later down road when trying reestablishing contact again after finally getting back onto track financially speaking after having been disconnected previously due thus far having paid nothing whatsoever since initial enrollment agreement signed back when entering college freshman year meant signing away rights forevermore without knowing how much longer those terms would last once signed away under threat penalty clause stating
Avoid opening too many new credit accounts at once.
Opening too many credit accounts at once can hurt your score. Your credit history is a record of how you have used credit in the past, and opening multiple accounts at once can lower your score.
You might be tempted to open up a bunch of new cards if you’re trying to build up your financial profile or get out of debt fast, but this is not an effective strategy for improving one’s score. Instead, focus on paying off existing debt before applying for new ones–and make sure that each time you do apply for something new (whether it’s a credit card or car loan), it represents an improvement over what was already on file with them!
Avoid applying for too many credit cards at one time.
- Avoid applying for too many credit cards at one time. Credit card companies will check your credit history, and if you apply for too many cards in a short period of time, it may look like you are desperate for money. You may be turned down for a card if you have applied for too many in a short period of time.
Reduce the number of inquiries from applying for too many credit cards at the same time.
Reducing the number of inquiries from applying for too many credit cards at the same time.
There are a couple of ways to reduce the number of inquiries on your credit report: by applying for credit cards one at a time, or by applying to different banks. If you do decide to apply for multiple cards at once, make sure they have different limits and terms so that it’s easier on your score if one is denied (or if all are).
Don’t use your credit card to borrow money if you can avoid it!
If you’re looking to borrow money, credit cards are not the way to go. Credit cards are designed to be used as a convenience, not as a source of cash. When you use your credit card for borrowing money, it becomes harder and harder to pay off your balance each month because the interest keeps piling up on top of what was already borrowed.
As we’ve said before: don’t use your card unless it’s an emergency!
Good personal finance habits will help you build a strong credit history
- Building a good credit history is important.
- A strong credit rating can help you get a lower interest rate on your mortgage, auto loan and credit cards.
We hope this article has helped you understand the importance of building a strong credit history, and how to do so by following some simple steps. Remember, your credit score is a powerful tool that can help you get better rates on loans or insurance premiums, as well as qualify for better jobs or apartments–so it’s worth taking care of!