4 Credit Building Basics – Keeping it Simple
Is insufficient or bad credit history holding you back from realizing your dreams? Maybe you haven’t had the opportunity to establish sufficient credit history. Or perhaps you have items on your credit history that you aren’t proud of. If you fall into the latter category, you should talk to one of credit analysts. But if you’re looking for a good strategy to start building credit, please read on to learn more about how you can get off on the right financial foot. Credit building is possible with a bit of discipline and keeping it simple.
Start with a few simple steps…
1. Small, Steady, and Secured Card Usage
Create a history by keeping accounts open and making payments on time. If you don’t have any open accounts, you can start by obtaining a secured credit card and using it for responsible purchases like fuel or groceries.
Overpaying is not necessary, but be sure to pay all of your bills on time and for the correct amounts. Just be sure not to use too much of your available balance. Below 30% utilization of the total available balance is ideal.
2. Diversify your Credit
Another important factor, which accounts for around 10% of your credit score is having a healthy mix of both revolving and installment accounts. Installment accounts are accounts that have a predetermined repayment schedule with a start date and end date, such as mortgages, auto loans and student loans. Revolving accounts, such as credit cards, have no set repayment plan, as you are not borrowing up-front, rather you are granted the ability to utilize up to a maximum amount. Having both of these types of accounts in good standing helps you to demonstrate that you are able to be responsible for different types of payment plans.
3. Easy on the Inquiries
Finally, try to keep credit inquiries to a minimum. An inquiry is generated when you apply for credit. A small number is acceptable, as you can’t obtain accounts without them, but too many inquiries, caused by over-shopping for credit, can damage your credit score.
4. Credit Score Vigilance is Important for Credit Building
Be sure to monitor your credit score on a regular basis. We typically recommend a FICO-based service such as Privacy Guard or SproutYourScore but there are several websites that get the job done. Keeping an eye on your credit reports is not only useful for tracking scores, but it can also be a good way to catch things like fraudulent accounts and identify theft.
Remember, the above recommendations are NOT for people who already have negative items on their credit report. If you’re in that situation, you should learn more about our credit repair process and speak to one of our analysts.