How to Build the Perfect Credit History
In almost every financial move you make, your credit history is going to be crucial. It affects your credit score which, in turn, determines your eligibility for a loan, the interest rate on your credit card, whether or not you’ll be able to start up a business, and much more!
Because of this, maintaining a positive credit history is definitely something you’ll want to strive for. So, with that in mind, I’ve decided to share some easy steps you can take to build an excellent credit history.
1. Use Your Card and Accounts Regularly
It may come as a surprise, but accounts and credit cards that aren’t used could actually harm your credit score. An unused account does very little in terms of generating revenue for a creditor, so if one of your cards remains inactive for too long, a creditor may feel inclined to close the account. This will lower your credit utilization and eradicate the credit history of the card from your record. Less credit history means less proof that you are reliable to lend money to, and issuers are less likely to offer you good rates for credit cards and loans. If you so feel the need to start closing accounts, I suggest spreading out the closings to lessen the impact it has on your credit utilization. Also, try to avoid closing your oldest card. This account will possess the longest period of history and maintaining it will preserve a solid credit history length.
2. Pay All of Your Bills on Time
Making all of your payments on time is crucial to a great credit score and positive credit history. Set calendar reminders to make sure you pay your bills on time to avoid missing a payment. Unpaid bills are a red flag to the lender because you seem unreliable to lend money to.
3. Avoid Opening Too Many Accounts at Once:
Minimize the amount of accounts you have open. When you open a new account the average age of your credit history goes down. Not to mention, those who have too many accounts lose track of which accounts are being used regularly. Having only a few accounts that you use regularly, will help to build up your history and your score.
4. Vary the Types of Accounts You Have
To build up a great credit history, you should have variation in terms of the type of accounts you have. For example, don’t just have your student loan accounts on your history. Mix it up and open a car loan, auto loan, and a credit card. The diversity on your history makes you seem more responsible and reliable.
5. Check Your Credit Report
About once or twice a year, you should check your credit report for mistakes. Maybe you forgot to pay a bill or are a victim of identity theft. Without checking your report for these problems, they’ll never be fixed and can harm your score tremendously. You should always make sure to check your credit report from all three bureaus, Experian, Equifax and Transunion, as some creditors do not report to all three bureaus. Once your credit looks bad and your credit score decreases, it could be hard work to build yourself back up. Check your history so that you can address these problems right away.
The most important tip is to be patient! A perfect credit score and long and shining credit history doesn’t happen overnight. You’ll need to work on it for a little while before your score and history are excellent. But don’t obsess! By following the steps above, you’ll eventually be able to build up a perfect credit history and in turn, an excellent credit score.