The concept of a credit score may seem intimidating at first, but once you understand what factors affect your score, it's very easy to maintain and improve your personal credit score. The score itself is an indicator of how trustworthy you have been in the past with money that has been available to you.
The main factors are:
- Payment History – have you paid your bills each month?
- Credit Limit – how much money were you trusted to spend and pay back?
- History – how long have you had credit?
Knowing that, you can see that building a higher credit score is something that takes time and a habit of good financial practices. There are a few simple things you can do to take positive steps toward building credit.
- Make regular payments on time.
If a company sees that you are conscientious and responsible with your commitments, that you make your monthly payments on time every time, they will be more likely to extend you a larger credit limit or offer you a card with better benefits in the future. Even if you can't pay your balance in full, make your payment on time. Timely, responsible payments are the most important factor in your credit score.
- Stay under your credit limit
Use your credit card only for what you need, and pay it off quickly. Although large purchases or unexpected bills can happen, it's better to make a habit of not spending more than you have. If you know you have $500 in your bank account, but your credit limit is $1,100, spending more than the $500 you can pay off will leave you with more to pay the next month due to the interest accrued on your balance.
- Don't open too many new cards at the same time
Every company wants you to use their card, and you'll get many offers in the mail. Research and decide which card is best for your lifestyle, rather than opening many different ones to keep track of and pay off. Opening many cards also affects your history, because your average length of time with each card will drop.
- Keep your accounts open
This might seem counterintuitive. Why would you want to keep a card you are not using? The answer: your history. If you have a credit card that remains paid off every month (even if it's paid off because you don't make purchases with it), your credit score will go up.
- Check your credibility
The funny thing is that you need credit in order to build up your credit score. The earlier you start building credit, the better off you'll be in the long run. In the near-term, you need a credit card to get the best price on basic necessities, such as an apartment, a cell phone, and utilities. Over the long-term, you'll need an established credit history to buy a car or a new home. When you look back, you'll be glad you started early.
Go to SelfScore.com to start building your credit worthiness today.