How to Build Good Credit

from wikiHow - The How to Manual That You Can Edit

The only way to establish good credit is to actually to start buying on credit. This is the only way to establish a credit history which reveals your ability to pay for things that you buy or use.

Steps

1. Apply for a credit card. Choose one that offers the lowest interest rate and if possible one that offers a cash back percentage on purchases you make.
   
2. Check your budget. Find out how much cash you have left over at the end of the month, for an added purchase expense.
   
3. Use the credit card instead of cash to make the purchase. Make sure that you do not charge more than you can actually afford to pay at the end of the month.
   
4. Pay each credit card bill in full as soon as you receive it, so you do not establish yourself as a 'late' payer.
   
   • Realize that this method might not work for you, and follow another way of establishing credit.
     
   
   
5. Open checking and savings accounts. Lenders see bank accounts as signs of financial stability and consistent savings behavior. Given this, evidence of continuous use of checking and savings accounts increases your chances that a bank will offer you a credit card.
   
6. Alternatively, contact your bank or credit union, open a charge account with them, and deposit a specific amount of money 'into' the account. This is called a pre-paid charge account.
   
7. Charge as you need, but watch the balance. Remember this method only allows you to charge up to the amount deposited, and will count down, each time you make a purchase with it.
   

Video

In the so-called "new economy," a good credit score is more important than ever. You won't be able to get a mortgage loan and buy a home without one. In this video, the creator of the Home Buying Institute will teach you how to raise your credit score fast, by focusing on the three most important factors.

Tips

• When you establish your credit card, ask that your date of payment coincide with a date when you know you will have the money to pay. They will work with you on this.
  
• Getting a credit card that has the same due date as your utilities, rent or mortgage will make it difficult for you to have the funds on hand to pay off your credit card.
  
• Check your statement for the date that the payment is due. If you want to buy something close to that date, wait until after you have made your payment. This way you will avoid an extra charge within the same billing period.
  
• Once you have begun establishing a credit history, apply for a small amount of installment credit. The best credit scores are obtained through the use of installment credit (auto loans, personal loans and mortgages) in addition to revolving credit (credit cards and lines of credit).
  

Warnings

• Only buy or use the credit card, to charge an amount that you know you can pay in full. Once you start overcharging, trouble begins. Only charge what you can pay so that you will be able pay everything you charged in that one month period.