You should know that your credit score (FICO score) has a major impact on whether you’ll get a credit card or loan to make a big purchase like a car or a home. Good credit history can help you get insurance, rent an apartment, and even get a job. Many potential employers review your credit history these days. How much risk are the lenders willing to take? How have you managed your financial obligations to date?
The choices you make will determine whether you establish good credit or bad credit. So, how do you build a good credit history? You ensure that the money you have coming in will cover all of your expenses, including your monthly credit card bill. If you pay at least the minimum payment on all of your bills by the due date each month, you are establishing good credit. And if you pay more than your minimum payment, then you’ll be in even better shape!
If you don’t pay your bills on time, miss payments completely, or go over your spending limit, you’re developing a bad credit history that could lead to higher interest rates and additional fees. Strange as it seems, the poorer your credit, the more they charge you. A certain percentage of poor risks will default and everyone else in that category has to help defray the costs. See the article entitled Credit Problems posted on this site.
Fixing Bad Credit History
Having a bad credit score is sometimes difficult – especially in light of the fact that it usually requires a drastic lifestyle change. Once it goes down, it’s hard to build back up, but they can be fixed. It might take awhile, but it IS possible to get back on track. Here are some things that can help you build a strong credit history and improve your credit score:
- Pay credit cards, loans and service payments as soon as they arrive. Avoiding late payments is a great start to your credit history. You may want to consider signing up for Online Bill Pay with your financial institution. This way you can schedule bills for payment when they arrive to ensure they are paid by the due date. Some financial institutions even offer electronic alerts sent to your cell phone to remind you that a bill is due if you use the online bill pay tool. Get more information about online banking.
- If you are having trouble covering your bills, contact your creditors or start working with a legitimate credit counselor.
- Know how much credit you have available on your cards and how much you owe.
- Keep balances low on credit cards.
- Pay off your credit cards rather than moving the debt around.
- Budget for expenses like rent and utilities.
- Balance your checking and savings accounts to avoid overdrafts or bounced checks.