The credit system can seem like somewhat of a game. You have to have good credit
in order to obtain a loan, a credit card, an apartment, and sometimes even a job. But it can be hard to build good credit if you don’t have any credit history or if you’ve suffered from a negative credit history.
If you do have negative marks on your credit report, you can work with a credit repair company to improve your credit or try to do it yourself. Either way, the process involves disputing negative marks on your report with the credit bureaus, which can often take months.
Even if you are able to successfully remove the blemishes on your report, that doesn’t guarantee your credit will remain pristine. Good credit is something that you have to develop over time with good spending and borrowing habits. Here are some tips to get you on the right track.
1. Make Payments On Time
If you don’t already, making 100 percent of your payments should be your goal. This is not limited to just credit cards, but all of your credit accounts and other accounts such as utility bills. Your payment history has one of the biggest impacts on your overall credit score, so it’s very important that make all of your payments and make them on time.
2. Limit Your Credit Usage
Another high impact factor is how much of your available credit you’re using. Credit bureaus typically look at what percentage of your available credit you’re using. For example, if you have a limit of $5000 between your two credit cards and you have a balance of $200 on one card and $300 on the other one, your overall credit usage would be 10 percent.
A good rule of thumb is to try to keep your usage to under 30 percent, as this is what the credit bureaus typically deem as a good utilization amount.
3. Avoid Delinquency
Making all of your payments on time helps with this one. When your accounts go past due, your creditors may send your account to collections. Every time this happens, a delinquency is marked on your credit report. This can really hurt your credit score because it can stay on your report for seven or more years!
4. Limit Credit Applications
Every time you apply for a new line of credit, the creditor will perform a hard inquiry on your credit, which can drop your score by a few points. Hard inquiries are not inherently bad. However, if you have many hard inquiries within a short amount of time, your credit can take a big hit. Additionally, these inquiries can stay on your credit report for up to two years. The ideal is to keep these limited to one or two at a time.
5. Check Your Credit Score Frequently
Many companies allow you to check your credit score for free. Knowing your credit score and checking it frequently can help you spot any errors or discrepancies that could arise. It can also help you figure out what you can do next to improve your score.
Building up good credit
takes time. These tips are not shortcuts to a good score, but rather types of behavior that can help you develop a good score. No matter what your credit score is, developing and managing your credit really boils down to responsibility. That may mean saying no to a new credit card that you don’t need. It could also mean not charging something to your credit card that you don’t have the means to pay back. Before doing something that could negatively impact your credit
, it may be good to stop and think: “Do I really need this?” If the answer is no, it might be best to wait until the answer is yes. If your credit is suffering, you might consider looking into professional credit repair services
to help you get a second chance at building good credit.