Tips on building great credit history

Your credit score impacts almost every financial move you make. An Excellent credit score affects your ability to get a job, loan, credit cards, basic utilities and services, even rent an apartment or lease a car.

Imagine this scenario. Two friends go shopping for a car. One gets the car financed at 3%. The other gets a rate of 23%. Why? It’s the case of good and bad credit.

There are three aspects to the whole credit history picture.

  1. History- Starting with a credit history 
  2. Rebuilding- how to rebuild your credit 
  3. Maintain- how to keep your credit strong. 

We shall look at all three

How to build credit history that benefits you:

  • Start early
  • The length of your credit history is a key factor in determining your credit score
  • Start small. Lenders assume you don’t plan to live within your means when you apply for a lot of credit in a short period of time
  • Open store charge card or credit cards to build credit. . If you don’t qualify for a store charge card or credit card, open a secured credit card. It may allow you to use your money to establish a credit history. (For example, you contribute $500 to the card; your credit limit is $500.). When you show consistency, the bank will return your security deposit. 
  • Endeavour to  your balance in full each month or keep your balance low. All unpaid bills, including credit card, medical, cell phone, etc., will appear on your credit report and negatively impact your score

How to rebuild a bad credit score:

  • Review your credit report
  • Regularly review for unauthorized activity, errors and unpaid bills. You may request a free copy of your credit report annually at HERE. Report issues immediately
  • Create a plan on paying off debts. Develop a time frame and budget for paying off current debts
  • Pay off collection items and delinquent accounts first, then debts with higher interest rates; you may save money
  • Pay bills on time. After a while, it will positively impact your credit score and creditworthiness
  • Plan ahead for major purchases. High credit scores provide borrowers with lower interest rates and higher credit limits. It takes at least 6 months to improve your credit score, so plan ahead when you intend to purchase a home, vehicle or other big ticket item.

Excellent credit scores can be yours

How to maintain an excellent credit score

  • Limit your accounts
  • Numerous store and/or credit card accounts may lower your credit score even if accounts are not used and balances are paid in full
  • Lowering your available credit will lower your credit score
  • Make purchases and pay the full balance each month
  • Maintain a low balance-to-limit ratio
  • Using less of your available credit will help raise your credit score
  • Pay bills on time. Lenders consider payment records to help determine your reliability
  • Maintain employment and/or primary residence for 2 or more year. Lenders use this information to help determine your stability
  • Review your credit report. Regularly review for unauthorized activity and errors. Report issues immediately
  • Only Borrow What You Can Afford. A credit card isn’t a permission slip to buy things you can’t afford. This is the quickest way to get into debt and credit trouble.
  • The best way to build good credit is to create the habit of charging only what you can afford. This habit lets future lenders and creditors know you’re a responsible borrower. You’ll find it easier to borrow money and get new credit when you show that you have the discipline to borrow only what you can afford to repay. The same rules applies to loans. Regardless of what the lender says you qualify for, you should only borrow what you can pay back.

Sources:

TD Bank, The Balance. 

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