If you want to whip your finances into shape, heres a good goal: improving your credit score.
A lot of goal-setting efforts fail because theyre so extreme.
Think of all the bonkers weight-loss and money-saving goals that never go anywhere.
No extreme measures are required.
But there arent any shortcuts.
Building good credit is a goal you should probably commit to long term.
How to Build Good Credit in 10 Steps
Ready to finally prove your creditworthiness?
Heres how to build good credit in 10 steps.
Stay on Top of Your Credit Reports
About 1 in 5 credit reports contain inaccurate information.
(No, checking your own credit doesnt hurt your score.)
Many banks and credit card companies also give you your credit scores for free.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Ask one of these companies to help…
2.
1 thing you’re able to do to build good credit.
Yourpayment historydetermines 35% of your score, more than any othercredit factor.
Set whatever bills you’re able to to autopay for at least the minimums to avoid missing payments.
A strong payment history takes time to build.
If youve made late payments, theyll stay on your credit reports for seven years.
The good news is they do the most damage to your score in the first two years.
After that, the impact starts to fade.
Did you know?
Look for cards that are specifically marketed to help people start or rebuild credit.
You put down a refundable deposit, and that becomes your line of credit.
Just check that the card issuer you choose reports your payments to the credit bureaus.
Look for a card with an annual fee of no more than $35.
Ask for a Limit Increase.
Pretend You Never Got It
Increasing your credit limits helps your score because it decreases yourcredit utilization ratio.
Thats credit score speak for the percentage of credit youre using.
That way, youll avoid lowering yourlength of credit, which could ding your score.
The downside of a higher credit limit: Youll have more money to spend that isnt really yours.
Your credit utilization ratio is determined exclusively by your lines of credit.
Credit scoring methods reward you for having along credit history.
Then pay it off in full.
So avoid applying frequently for new credit cards, as this can signal financial distress.
But if youre in the market for a mortgage or loan, dont worry about multiple inquiries.
In a nutshell, you take out a loan to wipe out your credit card balances.
Many debt consolidation loans require a credit score of about 620.
While its important to build good credit, look at the bigger picture.
Remember, though, that while credit scores matter, you matter more.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder.
Send your tricky money questions to[email protected]or chat with her inThe Penny Hoarder Community.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
