How to build your credit – Part 1

These are many ways to build credit overtime…but it is important to know there are no quick fixes. Here are a few tips:

1. Get into the habit of paying utility bills on time;

2. Similarly, make monthly payments on outstanding debt obligations on a timely basis;

3. In the case of credit cards, it helps that your monthly balance is reported to the various credit agencies. Choose issuers accordingly. Also, develop the discipline of paying off monthly spending or at least pay a little more than minimum payment required;

3. As funny as this sounds, in order to build credit you need credit. In this regard, especially for those just starting out, credit cards serve a great purpose. Be prepared to accept a cash secured card as that may be the only option until circumstances improve. Either way, the main purpose is for you to build an excellent track record of payments;

4. Department store and gasoline cards are also great alternatives and often are easier to get than major credit cards;

5. Following on points (3) and (4). Credit cards and other forms of credit are important to building credit but don’t get carried away. Cap the number of credit applications and manage well the lines that have been offered.

6. Manage your ratios. Banks and credit agencies will look favorably on a good debt or debt service ratio which effectively is your total liabilities against your total assets or total monthly debt obligations against total monthly income. Similarly, a better total available credit to total credit used ratio will also be viewed in a better light;

7. Establish a cost effective means of checking your credit report on a monthly basis. Add any information that may help your cause and act quickly to address any discrepancies found;

8. Take all necessary precautions against identity theft. Perpetrators can quickly rack up huge liabilities, and depending on the circumstances, cause significant harm to your credit status;

9. Establish banking relationships. For example, open checking and savings accounts, small though they may be. They are excellent proof that you are paying monthly bills while putting a little away for the rainy day;

10. Ride on the “coattails” of someone else with excellent credit by establishing joint accounts.

11. Buy furniture and appliances on credit as opposed to paying cash. It’s a great way to establish an excellent track record of payments.

Tagged with: Credit Cards • Ratios • Time 2

Filed under: How To Make My Credit Better

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