subject: Building Good Credit Habits [print this page] Whether you are working to build a good credit history or to repair a bad one, there are several things that you should know. First of all, keeping an eye on your credit report is the very best thing that you can do. By ordering an annual credit report, you will be able to watch for any reporting errors or accounts that have been opened as a result of identity theft. Keeping these items off of your credit report is the very first step to maintaining a healthy credit rating.
When you start out, it is a good idea to get a credit card, but only choose cards that have low credit limits. This will discourage you from making large and unnecessary purchases with your credit card. You should make one or two small purchases per month on your card to keep the credit card company from closing the account. Always be sure to pay off the full amount when the bill comes, though. By doing this, you keep a very low debt to available credit ratio, which will work to boost your overall credit score. In addition, you will begin to build good habits in regards to your credit cards by learning to tell yourself no when you feel the urge to make large purchases. Remember that credit cards are essentially loans, which means that you are spending money that is not exactly yours.
Be sure to make all monthly payments in a timely manner. This includes your utilities bills, because these companies will report you when you are more than thirty days late with a payment. Even if a late payment reduces your credit score by just a few points, the derogatory mark on the credit report can result in a loan rejection at a later date. Potential lenders will study your credit report for any possible risks that are associated with lending you money, and the inability to make payments on time will greatly hurt your chances.
Lastly, stop all credit card offers and tear up the ones that you do receive. This will curb any urges that you may get to open new credit accounts, which will also keep down the amount of money that you spend using a credit card. Building good credit can take some time, and using multiple credit cards will not raise your credit score any faster. In fact, you might just end up shooting yourself in the foot.
