Building good credit is a slow but steady process that can't be done in a few short months. Only by being conscientious about your bill-paying habits and credit card use can you slowly work up to building the credit score you want.
The higher your credit score is, the more money you can potentially save on interest rates when applying for loans, lines of credit or new credit card accounts. Whether you are just beginning to build a credit history or are in need of maintaining your current credit score these tips can help your cause.
Develop a Payment History
Make payments on time
Paying bills late or having collection services come after you to pay your delinquent bills can have a very negative impact on your credit score. Always pay your bills on time and make at least the minimum payment due.
Pay off collection accounts
Paying off any amounts that have been sent to collections is the right thing to do but be aware that it will stay on your credit report for seven years. Just because you pay off a collection debt doesn't mean it will be removed from your credit report.
Call your creditors
If you have lost your job or are experiencing other problems with your finances and can't pay your bills on time, call your creditors immediately and explain the problem to them. Try to work out a payment schedule that both sides are happy with.
Credit Card Etiquette
Manage your accounts wisely
If you are just beginning to establish a credit history you should refrain from opening several credit card accounts at once. When you open several accounts in a short time it can actually be a negative influence on your credit score. Instead, manage the one or two cards you do have responsibly.
Watch your credit card balances
Try to keep your credit card balances low and, if possible, pay them off each month. Maintaining high balances on all of your credit cards, even if you make the minimum monthly payment regularly, can negatively impact your credit score.
Close old accounts?
Canceling credit cards that you don't use anymore is a complex subject. Don't simply close an old account without thinking it through thoroughly. Sometimes, leaving an account open - even if you do use it - can positively impact your credit score due to the age of the account or other factors.
See also: Old Credit Cards - Keep Them Or Cancel Them?
Your credit score is a number that should be taken seriously. Do what you can to maintain a good score and it can help to save you money in the long run. Before making any financial decision, consider what, if any, impact it may have on your credit score.