It is important to keep your payments up in order to build credit history. It will make it easier to get lower interest rates on balance transfers or unsecured cards. You will also be eligible for favorable rates on your mortgage and car loans. Good credit can also lead to lower car insurance rates. Some landlords will even use your credit score as a screening tool for potential tenants.
Pay bills on time
It is essential to pay your bills on-time if you want avoid late fees. Late fees add up quickly, and it can be difficult to plan your monthly spending. These fees can spiral out of control and make it almost impossible to pay your next bill. There are several ways that you can make paying your bills promptly a habit.
Make sure to set up electronic reminders for your bills so you always know when they are due. Set them for at least 5 days before the due date. This will allow you to avoid missing payments because of time zone differences.
Keep balances low
A low balance is one of your best options to increase your credit score. Many experts suggest a balance of less than 30 percent of your credit limit. It's better to pay down debt than to transfer it into another account. By paying off your balances each month, you can boost your credit score by reducing your debt.
Your FICO(r), or credit utilization, accounts for around 30%. If your credit utilization ratio exceeds 30%, it is an indicator that you are financially dependent. Conversely, a low credit utilization ratio means you don't depend on your credit card as your main source of income.
A long credit history is important
Maintaining a long credit history is an important aspect of building a good credit score. Your credit score is determined by many factors such as your payment history and how much you owe lenders. You can build a strong credit history by paying your bills on time, and keeping your credit utilization rate low.
15% of your credit score is determined by the length of credit history. You can increase your score by having accounts that have been active for at least two years. Pay off past due credit card balances. Long credit histories will result in lower interest rates for loans and credit cards.
Lower utilization is better
Your credit utilization ratio should be low if you want to improve your credit score. While it may seem daunting to keep your ratio under 30%, there are simple steps that you can take. You will have better financial health overall if your utilization rate is lower. Additionally, credit will be available when you need.
First, apply for a credit line with a greater credit limit. The first step is to open a new account. This will increase your total credit limit, and lower your credit utilization. This step won't necessarily improve your credit score. Opening another account will only increase your total credit limit, which will negatively impact your score.