How To Build a Solid Credit Score

How To Build a Solid Credit ScoreNo matter what stage of life you are in, a good credit score is essential. You never know when you are going to need a loan or have to make a credit purchase, whether it be for a car, a home, or education. Unless you have saved up a significant amount of cash, you’ll be out of luck without a decent credit rating. Fortunately, it doesn’t take much to build a great credit score. Just follow a few steps like the following to establish a solid credit rating with agencies like Experian, TransUnion, and Equifax.

Start Small

There is no need to apply for a $10,000 line of credit to start building an impressive financial reputation. Get a small credit card of perhaps $500 and load it from your regular income or savings to use as needed. Over time, the more you use the card and make timely payments, the better credit status you will earn. Some people think it is better to not use credit at all to establish a strong financial base, but that is a myth. You cannot earn a credit score without using credit. Just don’t overdo it.

Avoid Unnecessary Charges

Use your credit accounts to charge only what you really need. Of course, if you want to buy $2000 worth of new living room furniture and you are sure you can make payments on time, then go ahead. The goal is not to overextend your credit on unneeded transactions. When you use credit to buy tangible things that hold their value, like a bicycle, for example, you can generally sell it if you can’t keep up with charge account payments. But when paying for non-tangible items, especially frivolous expenses like entertainment, it can become easy to fall into the habit of charging things that you may not be able to afford. Not only that, but if you find it difficult to make the payment each month, you have nothing to sell to try and recoup part of that expense.

Keep Up with Credit Payments

Never skip a payment, except for an emergency. If you must be late due to unexpected circumstances, contact your creditors and let them know. Often they are willing to work with customers to allow them to miss a payment temporarily or make a partial payment. But taking those steps without discussing them with the creditor creates a bad impression and may lead to a negative credit score. Making your monthly payments on time is one of the best ways to establish and maintain a positive credit rating.

Limit your Credit Card Collection

Don’t be tempted by all the credit card offers that come through the mail. Using several credit cards simultaneously may lead to maxing out the available lines of credit and creating a burden for repayment. If you have a mortgage loan, a car loan, a student loan, and one or two credit cards, that may be enough for the time being. Review your financial circumstances and monthly budget periodically to ensure that you are balancing income with expenses without going overboard. You never want to be in bondage to your credit cards. Use them only to serve your interests in a valuable way that builds a positive credit score.

Easy credit often leads to overspending. Choose your credit card wisely, shopping for a low interest-rate with minimal to no transaction or maintenance fees. The same holds true for loans. Taking a responsible approach to the use of credit is the best way to build a positive credit score that will come in handy when you need it for big ticket or unavoidable purchases.

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