Steps To Building Good Credit
A good credit score is a vital asset for your financial present
and future. To a large extent, your credit standing determines
what opportunities are open to you, especially as it concerns
finances. Therefore, the importance of building a good credit
rating cannot be over emphasized. 'It's a thing you really can
take to the bank'.
There are several steps you must follow and some rules you will
have to adhere to if you sincerely want a good credit standing.
However, after establishing your credit worthiness, you will
find that it was worth the stress.
Debt is one monster that pulls down your credit and destroys
your credit history. It does more harm than is generally
acknowledged. The first step in building a good credit rating is
always to cut down on debts as much as possible. It is
recommended that you keep your total short term debts e.g.
credit card balances, large telephone bills, installment loans
etc. at a total of not more than 20% of your total income. This
will make it easier to pay off the debts, without missing
payments or defaulting. It also creates a very low debt profile
that looks very good on your credit report.
Another strong point you can make while building good credit is
a solid income history. Maintaining a good record with banks and
other creditors will also go a long way in portraying you as
credit worthy.
A secured credit card is another tool you will find useful in
your quest for a solid credit standing. With secured credit
cards you have to maintain a minimum deposit in your account.
The attached credit line is always a percentage of the minimum
deposit. This serves several purposes and is very useful in
building a good credit rating. A secured credit card ensures
that you don't over spend or accumulate unhealthy debts. It
creates financial discipline in you that is essential in
maintaining a good credit history. You won't need to bother
about secured cards, it is not in any way different from regular
cards and no one will know you have a secured card unless you
tell them.
To build good credit, it is also useful to get national or local
retailer's card. It is always easy to win credit from retailers
and once you have established a good track record with a
retailer, you could use the reference to boost your credit and
also to secure additional credit from others. You will find it
quite easy to establish a good record with retailers and will
also be pleasantly surprised at the positive influence it can
have on your credit rating.
Apart from retailers' cards and others, it will also help to
open a checking account when building your credit. When
potential lenders check your credit with your bank, they, most
often, only learn about your initial deposit. It makes sense,
therefore to open your checking account with a large initial
deposit, as much as you can afford. It is also reasonable to
keep the account balanced and active and to ensure that you do
not overdraw the account. Just like repairing bad credit,
building a good credit rating requires time and a lot of
financial discipline, but in the end, you will be proud of what
you have achieved.