8 Best Ways to Build a Good Credit Score
Updated: May 7, 2020
Maintaining a good credit score is vital if you want to apply for loans or credit cards. A good credit score typically means lower interest rates, and that means more cash in the bank. It’ll also be easier for you to get loans and credit. This is why it's so important to build good credit as early as possible.
Everything you do that involves credit becomes part of your credit history. Using credit responsibly is a must if you build and maintain a good credit history.
Create the habit of charging what you can afford
The quickest way to get into debt and credit trouble is to slip into buying things you can't afford using your credit card. The best way to build good credit is to create the habit of charging only what you can afford. When you show that you have the discipline to borrow only what you can afford to repay, then, you will find it easier to borrow money and get new credit. This habit lets future lenders and creditors know you're a responsible borrower. The same as charging what you can afford helps you avoid excessive debt.
The same rules apply to loans. Regardless of what the lender says you qualify for, you should only borrow what you can payback. Before you shop for a loan, review your budget to see what monthly payment you can afford. Make sure your loan payment doesn't exceed the amount you've come up with.
Start with only one credit card
New credit applications account for 10 percent of your score. Each time you apply for credit that prompts a hard inquiry into your report, your score will take a hit. Don't make the mistake of opening up too many credit cards too soon. The more credit you have, the more you'll end up using and the harder it will be to keep up with your balances and payments. Too many credit cards and too many inquiries into your credit can negatively affect your credit score. Unless it’s absolutely necessary, don’t apply for new credit cards or loans if you want to keep your score up.
Try not to rack up the balance on your credit cards
Maxing out your credit cards—or even coming close—is irresponsible, particularly if you don't plan to pay the whole balance off within the month. Borrowers who max out their cards often have difficulty repaying what they've borrowed. When you run up big credit card balances and don't pay them off, your credit score also suffers. Tip: Keep your balance below 30% of your credit limit for building good credit.
When possible, make payments in full
Paying off your full balance each month won't be a problem if you're only charging what you can afford to pay. Paying off your balance each month shows that you're capable of paying bills, something creditors and lenders want to see.
Since a large part of your credit score includes timeliness of your payments, paying your balances on time improves your credit.
Make sure you pay all your payments on time
Your payment history accounts for 35 percent of your credit score. As long as you're paying on time, your credit score will not be affected since not all of your monthly payments are listed on your credit report. But any bill can potentially wind up on your credit report if you become delinquent and the account is sent to a third-party collection agency. To achieve a good credit score, try to avoid negative accounts from being added to your credit report. If you’re terrible with being on time, you can set up auto payment plans through your bank or with your credit card to ensure that bills are paid for you, on time, every month.
Keep an eye on your credit report and make a stink about errors
Errors on your credit report are more common than you might think. When you get the reports, go over them carefully to look for errors, and get on the horn right away to dispute ones you find.
Keep old credit cards open to maintain the longer history
Leave your oldest accounts open since they help increase your credit age and build good credit. The longer you've had credit, the better it is for your credit score. Keeping old cards open can benefit your credit score, and one is the length of your credit history, which accounts for 10 percent of your score.
Seek Help, Use a credit repair service
There are a couple of innovative ways of boosting your credit score, above and beyond the ordinary “pay on time” methods. One is Ramsey Credit Services - a company that helps with credit restoration whenever you need help in removing negative unwanted accounts from your report and get a good credit score. You can schedule a Free Consultation with them.