Building a good credit history

Creating a solid credit foundation early

Good credit is vital in even the smallest financial transactions today, like getting your utilities turned on or establishing cellular phone service. When you don’t have good credit, these service providers require you to pay a deposit to establish service. Start building a good credit history as early as possible to avoid paying hefty deposits.

Paying your bills on time is the easiest thing you can do to build a good credit history. Even bills that aren’t credit cards should be paid on time. While utilities and similar bills aren’t regularly included in your credit history, when unpaid, they can wind up on your credit report as a collection. Collections have a negative impact on your credit.

The timeliness that you pay your bills has the biggest impact on your credit history. When you are current on all your bills, lenders view you as less of a credit risk. This, in turn, will benefit you with lower interest rates than if you had delinquent payments in your credit history.

You don’t have to pay the full amount of your credit card balances each month, but you do need to make at least the minimum payment. Any time you pay less than the minimum payment, the creditor reports your payment as being late for that month.

Always be aware of your credit limit and balance for your credit cards. Be careful that you don’t go over your credit limit. When you exceed your credit limit, your creditor will charge an extra fee, in addition to your regularly scheduled payment. This extra fee can make it harder for you to make your minimum payment. Not only that, going over your credit limit will be included in your credit report. Future creditors will deem credit limit overages as an inability to handle credit.

If you have any credit cards that are not being used, and you don’t anticipate using them, these should be cancelled. Make sure the balance of the card is completely paid off before cancelling the credit card to continue building a good credit history.