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Steps to Building Good Credit

Regardless of whether you’ve filed for bankruptcy or just aren’t happy with your credit score, there are ways to improve it. A low credit score can stand in the way from getting a loan for a house or car, can cause higher interest rates, and potentially prevent you from landing a new job. Building good credit can start today, by taking these simple steps.

  1. Pay your bills on time every month. Your history of payments is a major contributing factor to your credit score, so it’s imperative that they’re made on time. Just one late or missed payment can bring down your credit score. If one of your accounts happens to go to a debt collector, this will be on your credit report for 7 years.

  2. Obtain a secured credit card and establish your first credit reference. With a secured credit card, you’ll place a deposit down and have a limit that’s typically equal to the amount you put down for the deposit. Your bank account will serve as collateral. When applying for a secured credit card, make sure to watch out for extra fees and charges. You’ll also want to make sure that the card is reported on your credit report. If possible, you may be able to find a card that can be changed over to an unsecured card after certain period of making payments on time.

  3. Use your secured credit card to buy things you would normally purchase, like groceries or utilities, but don’t spend up to the limit.

  4. Pay off any loans that you might have. Paying off credit cards, in particular will give your score a boost. Other loans such as a mortgage, student or car loans will be a relief to have paid off, but won’t do much to improve your score. Do not close the account, however, as closing credit card accounts has a negative effect on your credit.

  5. Open new checking and savings accounts. Maintaining a checking or savings account indicates to creditors that you are responsibly managing your finances.

  6. Keep a watchful eye on both your credit and scores. Errors can happen, and if you regularly check your credit report, there will be less damage as opposed to catching them later on. Sites like annualcreditreport.com and freecreditreport.com provide free credit reports.

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