Handy Hints and tips – The Do’s and Don’ts for making good decisions to build a solid credit history.
The best way to start, tips for making good decisions and the things to avoid.
Building a solid credit history is extremely important. It is as important as having good employment references. Generally it is possible to live on cash but you do need to have a solid credit history to be able to purchase the big ticket items such as a car or a home. Without a good built solid credit history – getting finance for these items can be almost an impossible task.
There are a number of ways to building a solid credit history. Here are some examples.
Check On Your Credit Report
The way to do this is to check your credit report, which is free once a year from each of the following credit bureaus – Exerian, Equifax and TransUnion. As you study your report you can check on the “health” of you credit and build on that. Building a solid credit history is an important way to be sure that your financial situation is in a good place before obtaining more credit.
Your credit report is fed through a formula created by Fair Isaac Company. This determines you FICO credit score. Generally the financial institutions across the world use these scores to determine if the individual is a credit risk. The range is between 350 to 850. The higher the number the better the credit.
For an individual who is just starting out, it is very important that they go over their credit report. Make sure that there are no mistakes and make sure that everything is correct. If you fail to do this, it can impact on your credit score.
Where Do You Start?
When you are beginning to build a solid credit history, focus your attention on one line of credit. A good starting point is a credit card. A credit card is considered as self-managed. This means that you and only you can decide how much you are going to spend each month. The less you spend, the less you have to pay back. If you manage this correctly, you have somewhere to start building a solid credit history. This is a good start to indicating how you manage your credit.
The difference between an unsecure credit card and a secure one is the unsecure card has a spending limit, which can be determined by your credit history and your income, which can often make it difficult to obtain a card in the beginning.
A secure credit card usually requires a security deposit that becomes collateral.
Each lender has different rules so it’s best to do your research before you sign up, that way you can find a card that suits your needs and is the most affordable to you.
Another great opportunity to building a solid credit history is to apply for a co-signed card or loan. This is a good way to manage the credit as whatever you do with your card – affects not just you, but the person who has co-signed for you.
If managed correctly, this is a beneficial way to build a solid credit history.
As long as you manage your credit correctly, it shouldn’t take long to see the improvements on your credit. The better your credit looks, the better your scores will be.
Things to Avoid
All decisions that you make, especially at the start, are equally as important for establishing good credit. With good credit payment history, this shows exactly how you manage your credit and with that, building a solid credit history shows.
Making sure that you pay your bills on time, every time, is a very good way to help build a solid credit history. It is also important to keep paying your balance to keep it from getting to high. If it is possible, if you can pay more than the minimum payment is advisable and if possible, pay the total balance. This is also a very good way to building a solid credit history.
If you use most of your available credit, this may indicate that you may have problems repaying your debt which will reflect badly on your FICO, so a way to help yourself and reflect positive scores, use less of your available credit.
If you have applied for a large number of credit cards at the one time, this could signal a red flag to the FICO. Having good credit makes it easier to get more credit but having “too much” credit can actually be a bad decision. This can make you look very risky to financial institutes.
Approximately 90 percent of credit decisions made in the US are factored by FICO, but these scores are not the only decisions made by the lenders. Keeping up with all your personal bills will also show good credit decisions. Making sure that all your personal bills e.g. utilities and rental payments will be reported on your credit history so it is your best interest to pay these bills by their due dates to avoid being marked on your credit report.
When you apply for any type of credit, each lender will take into account how your history is and whether all your payments are paid on time or if there has been late payments and making their decision on whether you are a risk or not.
Looking To the Future
As long as you keep your line of credit good, you may consider getting more credit, depending on what your needs are. A good way to building a solid credit history is to have a mix of different credit, this shows that you are more likely to have a good “revolving” credit.
If you have some problems with a payment or two, the best way to repair your credit is to make extra payments or to back it up with a month or two to catch it right back up. If it is a long time ago that you had some problems with your credit, it is less likely to impact your score. It is understandable that people make mistakes, but the sooner you show that you can rectify your mistakes, the sooner it will help improve your credit. Having good habits in the very beginning is important as bad habits can creep in and have a detrimental effect on your credit.
As soon as you have built a solid credit history and have a regime in place, regularly check your credit report. Do this at least once a year. It has been said that checking your credit report can have a negative impact to your credit score. This is not correct. It is encouraged to keep an eye on your credit so that you are aware of how healthy your credit is and detect any signs that there is any problems that you are unaware of such as identity theft.