1. Make sure you pay your bills on time. Payment history is one of the most important aspects of building a good credit history. Not only will being timely on your payments help you build positive credit, but you will be able to avoid late fees and finance charges along the way.
2. Limit your credit applications. Every time you fill your a new application for credit, an inquiry will be made and your credit score will take a slight hit. Lenders see multiple inquiries as a sign of desperation or financial mismanagement. During the time you are trying to build or rebuild your credit, keep these at a minimum.
3. Keep an eye on your credit. Once a year, make it a point to request a copy of your credit report. Check for errors or any signs of identity theft. You are entitled to one free copy per year.
4. Keep your credit card balances low. If all possible, do not max out your credit card limits. Try to keep about 30% of your total credit line free to create an optimal ratio that credit score agencies use as part of their credit score calculations.
5. Stay away from cash advances. Withdrawing cash from your credit card is not smart for your overall financial credit building strategy. You will end up paying up to 5% plus any finance charges on your withdrawal.
By taking a few simple steps, it is possible for any individual to build a good credit history and create a sound financial portfolio.
