One of the best ways to make your financial future easier to manage is to get a good credit score. Find out the steps you need to take to obtain a great credit history.
You’ve been told for years how important it is to have a good credit score. However, the problem is that knowing how to get good credit history is a lot different than knowing that you need to get it.
Everyone knows that you need to pay your bills on time, but if you want a good credit score, there is a lot more to it.
Knowing how to get good credit history is all about following the rules that are listed below. If you follow these steps you will watch your credit score rise until you eventually hit the magic 850 mark!
Why You Need Good Credit History
Before talking about how to get good credit history, we need to touch on why this is important.
Historically, the biggest reason is that your credit score will determine the interest rate that you can get on any kind of a loan that you apply for.
That includes things like a mortgage and a car loan, but also trickles down to smaller items as well.
If you are trying to buy a new computer using a store specific credit card that is advertised or you are trying to set up a payment plan for medical expenses, you are likely to be denied if you don’t have good credit history.
Those are all big reasons that you should work to increase your credit history, however, there are more. It is likely that your credit score will be checked when you try to rent an apartment or apply for a job.
The general reason you need good credit history is to prove to people that you are a responsible adult and that they can trust you to pay your debts.
How to Get Good Credit History By Paying Your Bills On Time
Paying your bills on time will account for nearly 35% of your credit score. If you make a late payment, it will show up on your credit history for 7 years and will reduce your score. If you have several late payments in your credit history, there isn’t much you can do about them if they are legitimate. Focus on making payments on time going forward because the old ones will eventually fall off.
Setting up automatic payments that are sent a week before the due dates is a great way to manage more easily manage your bills.
Use Your Credit
This is sometimes difficult to understand, but knowing how to get good credit history, includes using your credit cards. The best way to build up your credit score is to consistently use your credit cards, and then pay the balances in full at the end of each month.
Experts say that you should use up to 20% of your credit. Using your credit, and paying it off each month establishes a pattern of responsible credit use and helps convince companies that you are a good credit risk.
You should be very careful with this however. It is very easy to start thinking that you will buy something and pay it off “next month” instead of this month. However, that is how huge credit card balances get started. Carrying a large balance from month to month is going to hurt your credit score.
Show Stability in Your Credit History
If you constantly open and close credit accounts always looking for the best deal, it will look very erratic on your credit history. A great tip for how to get good credit history is to keep the same accounts open and active for as long a time as possible.
Show Variety In Your Credit History
In addition to showing stability and responsibility, you should have variety in your credit history.
This is tricky, because you shouldn’t necessarily go buy a new car just to have a different type of credit because that can backfire.
However, if you have a mortgage, car loan, credit cards and a student loan that are all open and are all being handled in a responsible manner, it can help your score.
Don’t Do Anything New
When you apply for a new credit card or loan, it will temporarily reduce your credit score for up to six months. If you are actively working to increase your credit score, you should avoid making those new inquiries.
Summary of How to Get Good Credit History
If you want to wrap up how to get good credit history into a single sentence, it is this: Show that you are a responsible adult who pays your bills on time and can be trusted to manage your credit in an effective manner.
What Do You Think?
Do you have other tips about how to get a good credit history that you would like to share?
If you have friends who are struggling with their credit score, this article may be able to help them.