Easy Ways to Establish Good Credit

Good credit is important to all aspects of life. A poor credit rating can prevent you from securing a mortgage, financing your education or even from landing a job. This is precisely why it is necessary to establish good credit and then guard it zealously over the course of your life. The following are a few ways you can start to build credit if you are just starting out.

Use Only One Credit Card

It is good practice to use only one credit card and use it wisely. Heavy reliance on multiple credit cards is one of the major red flags that credit agencies look out for as a signal of possible financial trouble. When you tap into several different sources over the course of a single month you send a message that you are unable to support your lifestyle on your current income. You also appear to have no control over your impulse to spend. These are not positive traits and will drag down your credit rating, so wherever possible you should try to limit yourself to one properly managed credit card.  

Be Diligent About Your Balance

Not only do you need to maintain only one credit card, you should also keep a close eye on your monthly balance. Ideally, your credit card should only be used to finance purchases that you can pay for in cash by the date your balance is due. This way you escape the punitive finance charges associated with carrying a balance on your card. Even if you do have an amount outstanding at the end of the month, you should never simply make the minimum payment. Always pay as much as you can to send a signal that you are serious about debt reduction.

Take a Loan and Keep Up With Payments

Another good way to establish credit is to take out a loan and then show that you can meet the payments. Ironically it is hard to create a credit history without having a loan or two under your belt but it is difficult to get a loan without credit. To get yourself on the radar you should try to get a loan for something that can be used as collateral, possibly a vehicle, and then pay off the loan successfully.

Pay Bills on Time

You don’t only build credit from taking loans. Credit rating agencies are also interested in your track record for paying bills such as your regular electricity rates or your cable bills. Prompt payments in these areas are great for your credit and can help tremendously in establishing a good reputation with financial institutions.

Remember that everything you do affects your credit history. It therefore pays to be responsible about how you spend your money but also the way you manage your bills and your outstanding debt.