The Key To Building A Good Credit History

The Keys To Building a Good Credit History

Bad credit can keep you from buying a home, financing your education, and even from getting a job. This is why it’s so important to build a good credit history.

Starting with your first credit card, everything you do that involves credit becomes part of your credit history. To have a good credit history, you have to use credit responsibly. But what counts as using credit responsibly?

Charge only what you can afford to pay. When you get into the habit of charging only what you can afford, it lets future lenders and creditors know that you are a responsible borrower. It will be easier for you to borrow when you show that you know how to only borrow what you are able to pay back. In addition, only charging what you can afford to pay keeps you safe from debt.

Use only a small amount of the credit you have.

Maxing out your credit cards – or even coming close – is one of the most irresponsible ways of using credit. Lenders know that borrowers who max out their cards often have difficulty repaying what they’ve borrowed. Chances are that you can’t afford to pay off a maxed out credit card balance. Staying below 50% of your credit limit is wise, below 30% is best.

Start with only one credit card. Many first-time credit card users accumulate a collection of credit cards within their first few years of using credit. Don’t do this. The more credit you have, the more you’ll end up using. Learn how to be responsible with credit before you apply for additional credit cards.

Pay your balance in full and on-time. If you’re only charging what you can afford to pay, this won’t be a problem. Paying off your balance each month shows that you’re capable of paying off your balances. Since a large part of your includes timeliness of your payments, paying your balances on time improves your credit.

Carry a balance the right way. Having a credit card balance isn’t bad as long as you do it the right way. Make more than the minimum payment each month to pay off your balance as quickly as possible. Don’t fall behind on your payments and continue to keep your balance at a reasonable level. If you follow these principles, carrying a balance won’t hurt your credit.