How do i build my credit score

how do i build my credit score

7 Answers

Like you've experienced, it's difficult to establish credit these days if you don't already have some. Credit is one of those things that you need to have for some things (a very few) like a home mortgage etc. and a good credit rating will save you money when you do use your credit because you'll get more favorable rates if your credit rating is higher. The way the rating agencies work is they look at how much credit you have, how much you use (and don't use) and most importantly--what your payment habits are. The following scenario is designed to take you through a CONTROLLED PROCESS whereby you can establish or re-establish your credit. It is NOT recommended to be a lifestyle. In general you should minimize the number of credit cards you have, and use them for convenience or for emergency spending. It is NOT WISE to continually carry a balance on credit cards and pay the minimum or slightly above it every month. Having said all that. here is what I would do:

  • Go to your bank or credit union where you have your checking and/or savings account. (if you don't have bank accounts you need to open at least a checking account. Also having a Savings account will be most helpful because it shows that you don't spend everything (or more) than you earn.
  • ask your bank or credit union to issue you a credit card. If you don't already have one and have a relatively poor credit rating you may have to get a card with a very low credit limit, maybe $500-$750.
  • When you get the card, use it to buy some essentials that you would normally buy anyway

    (like groceries). Do NOT use the card up to the limit!

  • Pay the card off completely when you get the bill. DO NOT just pay the minimum payment amount. If you do that you will literally NEVER pay it off, you will just be paying the interest and not paying down the LOAN that the balance represents.
  • Resist the urge to use the card more often. remember, you are establishing or re-establishing a credit history. This means that you have some credit available to you, you use it when necessary, and you pay it back ON TIME. For your own benefit, it's best to pay it off completely as well. the interest rates charged on credit cards is ridiculous.
  • within a few months you will start receiving credit card offers in the mail. this is an indication that your credit rating has improved and you are deemed a worthy credit risk. DO NOT sign up for more credit cards. Go back to your banking institution and ask for a larger credit limit if you NEED it. BUT please don't get in the habit of carrying a balance on your credit cards. This form of debt is possibly the most insidious form of servitude in our society.
  • maintaining credit discipline is incredibly important for you to remain in control of your finances, Americans in general are smothered in debt and spend an inordinate amount of their income paying high interest on credit card debt. You will be much better off financially in the long run if you learn to control your spending and minimize the use of debt---particularly for buying things that wear out, depreciate, or get consumed.
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    Category: Credit

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