Good credit has lasting financial benefits but building credit can look like a huge task. The trick is the more you practice good credit habits, the better your credit will get. There are several things you can do to build, rebuild and improve your credit. Here is what you need to do to start the process.
Build Your Credit
One of the best ways to do this is to apply for a secured credit card. A secured credit card is guaranteed upfront by a cash deposit. If you deposit $500 then your credit limit will be $500. You will want to make payments on time and keep a low balance to ensure you are building your credit.
Another good way to help boost your score is to ask a family member to add you as an authorized user on their credit card. You will get a credit card with your name on it and the primary cardholder will set a limit on how much you can charge. This is a good way to manage a credit line.
A major loan like a student loan or car loan is reported to the major credit bureaus making this a great way to build up your credit. Paying your loan payments on a car or student loan will build good credit. Creditors like to see a history of on-time payments which shows you can manage your line of credit responsibly.
Keep Up Good Credit Habits
Make payments on time on everything such as your utility bills, credit card companies and other accounts. Also, you want to have different types of credits because having different types of credit improves your credit score. Accounts like cell phone bills cannot be included.
Don’t just apply for a card and let it sit, use it on a regular basis. This keeps your credit utilization low. Your credit utilization ratio is the percentage of your available credit that you actually use. For example if you have a $1,000 credit limit, ty to keep your balance under $300 which is around 30% of your credit limit.
Get Your Credit Back on Track
To do this, you need to make sure your credit report does not have any errors. Knowing your credit score is a big plus to having an idea of your financial holdings. Getting a credit report from one of the credit bureaus will show you your credit activity, your credit history, and the status of your accounts. If there is an issue or a change in your financial situation, contact a creditor directly. They will work with you to create a payment plan.
Overall remember, that the best way to handle your credit is to live within your budget and avoid bad credit. If you do find yourself with bad credit, catch the problems early.