“No credit? Bad Credit? No problem!” Actually, it could be a huge problem. Credit is necessary to rent an apartment, buy a car, and get a good credit card APR. If you have bad credit, it can follow you around for years + affect the interest rates you get + who is willing to lend you money.
There are a few different things that affect your credit score: age of credit history, payment history, credit utilization, total accounts, inquiries into your credit, and derogatory marks. It is important to know + keep up with your own credit score.
Your credit score is made up of information reported to the three credit bureaus: Experian, TransUnion, and Equifax. Though you have individual scores from the three bureaus, their reports make up your FICO credit score. This is a number between 300 and 850 that lets give you an idea of where you stand.
While having a low score can keep you from getting approved for loans or apartments, it’s not a stain on your permanent record. There are things you can do to raise your score.
- Get a credit card. Making regular payments is the best way to grow your credit score. There is a wide range of cards with different perks to suit your fancy.
- Pay off your cards/loans. The less credit available you use, the better. Your score will be lower when your card is maxed out.
- Put all your charges on one card if possible. Having $1,200 spread over four cards is worse for your credit than $1,200 on one.
- Don’t apply for credit too often. Every time someone looks at your credit, it makes a small dip in it.
- Always pay on time. Being consistent is the best way to build credit. Missing bills can make a big dent in your score that takes time to erase.
- Consolidate your loans if possible. Having all your loans in a lump sum with one interest rate is better for your score + makes it easier to pay off.
- Don’t close a credit card just because you paid it off. Since the length of credit is important if you get rid of your first credit card, it could change the age of your score. Plus, the more credit you aren’t using, the better your score.
- Raise your credit limit when possible. Like tip seven, the more available, the better.
- Monitor your credit score. By keeping up with your score you will be better able to see when something has gone wrong such as an error or identity theft.
- Don’t get caught on small fines. Unpaid parking tickets + library fines that get sent to collections could affect your credit.
Your credit is under your control. I monitor mine through Credit Karma. You can never be too vigilant – especially with all the recent hacks.
Comment your good credit tips below.