Tips for building up credit | Learn more


A good credit score can transform your life. This is not hyperbole. Boost your credit score and you could qualify for a mortgage, car loan, or personal loan that might otherwise have been denied. It can also affect employment. A bad credit score can prevent employers from hiring you, especially in areas like finance. If you need a security rating, bad credit can prevent you from getting it. This is because those with large debts are more easily tempted to hand over information for money. Here are some tips for building credit to achieve your goals!

What is a good credit score?

Formally, credit scores are known as FICO or Fair Isaac Corporation scores, which are made up of three-digit numbers. Credit scores range from 300 to 850. Scores below 579 are considered poor. Those between 580 and 669 are considered fair. Good credit scores range from 670 to 739. Very good scores range from 740 to 799. You have reached the rank of excellent when your credit score exceeds 800.

Financial discipline

Building your credit score requires discipline. Start building your credit score early. Always use your credit responsibly. Keep in mind that any financial decision impacts your credit score for better or for worse.

You want to establish yourself as someone that lenders consider low risk. A low-risk loan seeker enjoys better terms and lower rates. A high-risk applicant is more likely to be denied a loan or pay much higher interest rates.

Every person’s finances are different, but becoming financially disciplined can help improve your credit score in months. Serious credit issues can take years to resolve, but it’s crucial to start as soon as possible.

Pay your bills on time

Aside from not paying bills at all, nothing hurts your credit score more than late payments. It’s any type of bill, including medical or utility bills. The more payments are missed or late, the faster your credit score goes down.

Use of credit

Do you know anyone who brags about maxing out their credit cards? Don’t rely on this person for advice on building your credit, because that’s another way to destroy it. Credit utilization (CU) refers to the percentage of credit allowed relative to the amount of credit used.

Your CU rate should never be more than 30% of your available credit. For example, if your credit limit is $1,000, do not charge more than $300. Usage above 30% indicates financial problems. Evidence of financial problems makes you less creditworthy.

If your UC rate is above 30%, make an effort to pay off your balances as soon as possible until you reach that magic number.

How to calculate the CU? Proceed as follows:

  • Add the balances of all credit cards.
  • Compare the balance to your borrowing limit.
  • Divide the total balance amount by the total credit limits.
  • Multiply this amount by 100 to determine your UC percentage.

Check your credit report

Take advantage of the free annual credit report provided by each of the three major credit card bureaus, Equifax, Experian and TransUnion. Credit report errors are quite common. This is especially true if you have a relatively common last name. One mistake can prevent you from increasing your credit score.

The most common credit report errors include:

  • Identity errors, incorrect name, address or telephone number.
  • Accounts with a name similar to yours.
  • Identity theft issues.
  • Closed accounts declared open.
  • Falsely flagging accounts as overdue or overdue.
  • Same debt listed twice.
  • Current balance incorrect.
  • Incorrect credit limit.

If you spot an error, contact the creditor or entity providing the information and the credit reporting company. The credit report includes instructions on how to dispute inaccurate information.

Credit mixes

Lenders prefer to see a mix of different types of credit, used responsibly. They want to know that you can manage different types of debt. Besides credit cards, such a combination may involve a car or personal loan, or a mortgage.

Tips for setting up credit and credit card accounts

When trying to build credit, avoid opening new credit card accounts. This is because the latest account reduces the overall age of your accounts. This impacts your FICO score. It also lowers your CU rate.

At the same time, don’t close unused credit card accounts. Such actions do not increase your credit score. On the contrary, closing the account reduces the amount of credit you have. Guess what happens next? Your CU rate increases.

Tips for building up credit without a credit card

There are ways to build credit without a credit card. Again, paying your bills on time and in full is the rule of thumb. You can also opt for an installment loan. Car loans, student loans, and personal loans, as well as mortgages, are examples of installment loans.

An alternative, especially for those with bad credit, is a non-profit lending circle. These are peer-to-peer loans, allowing borrowers to raise funds for expenses such as down payments. Online platforms can help you get a loan for a small fee. The lending circle then reports to one or more of the national credit bureaus.

More tips for building credit

To build up credit, you need to use your credit card regularly. Your goal is to pay off your credit card bills in full each month. Not using credit and paying cash for everything gets you out of even temporary debt, but that does nothing for building credit.

Lenders like stability. Staying at the same job or address for at least two years indicates stability. Even if you pay your bills on time and in full, constantly changing jobs or moving around can hurt your loan application. Follow these and other tips to build your credit and you should eventually have a great credit score!

Jane Meggitt specializes in writing about personal finance. In addition to investing and planning for retirement, she writes about insurance, real estate, credit cards, estate planning and more. His work has appeared in dozens of publications, including Financial Advisor, Zack’s, SF Gate and Investor Junkie. A graduate of New York University, Jane lives on a small farm in New Jersey’s horse country.


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