How to Build Credit HistoryWondering how to build credit history? No matter what you do or what your goals are you need to start building you credit score. But luckily there are plenty of ways to build credit, well cover quite a few of them shortly. Why is it important to build a Credit History? So, why does it even matter? Well look at it from a lender’s point of view, would you rather lend money to someone who has a good history of paying their bills on time or someone who has a bad reputation of paying their debts, or no reputation at all? If you ever plan to buy a house, buy a rental property, become a renter, or just need a loan your credit score is going to be one of the BIGGEST things that will be considered. More and more your FICO score which tracks credit is becoming associated with your quality of life. So, take the first step now to prepare for your future. How to Build Credit Ok, so building your credit score is important, but how do I build Credit? What are the best ways to build up credit? 1. Borrow It From Someone else The best way to build credit is to borrow it from someone else. There are two ways to do this you can either cosign a loan with someone else, or you can be added to someone else’s credit card. By doing so you inherit some of the other’s person’s score. Your FICO score becomes high through association in a matter of speaking. This is the fastest, easiest, and best way to build credit. However it does have one disadvantage, if the person you are cosigning with has a bad credit score you are also affected. It can give you a head start, but you NEVER want to inherit a bad credit score, keep this in mind. 2. Use Your Credit Card and Pay the Bills off Nearly every financial advisor wants to tell you to avoid credit cards; well this actually works against you in the long run. Try going to the bank when your 35 looking for your first ever loan and see what you get. If anything you will get a loan with a huge interest payment every month. I use my credit card for everything that I can! I’ve even had a few friends of mine ask me, “Why do you use your credit card so much?” It is because I am building my future. By buying that can of Coke with my credit card I not only receive the Coke, but I build my FICO score which will give me more opportunities down the road. Now the trick is to never spend more then you will be able to pay off in the end of the month. If you only have $100 in the bank, don’t spend $1000 with the little plastic card you’ve got, that will lead you to debt and all the terrible things that come with it. By using your credit card for your every day expenses and paying it off at the end of the month you are able to build your credit score and track your spending a little bit better each month. 3. Secured Credit Card That fine and dandy, but what if you can’t get a credit card? If you want to know how to build credit when you already have a credit score of 500 the answer is simple, get a secured credit card. With this you make a deposit, and you get a credit card with a credit limit equal to the amount you deposited. In a sense you are giving them money to loan back to you. If you cannot qualify for even the high interest credit cards this is probably the best way to build credit. 4. Only use a portion of your credit I’m going to switch from how to build credit to how to preserve it. And one way is to only use a portion of your credit limit. Ideally you never, or rarely ever want to exceed 30% of your credit limit. That isn’t normally that hard considering credit card companies are very eager to extend your limit. If a credit card gives you a $10,000 limit don’t exceed $3,000. If you are paying it off every month that shouldn’t be a problem. 5. More Credit Cards = More Risk One thing to consider when building your credit history is that taking on too much debt will actually hurt you. It is not uncommon for the three big FICO score companies to say, hmm he has $40,000 in credit card limits, can he really afford that much? 6. Don’t Over check Credit Your credit score is figured out by three big companies, Equifax, Experian, and Trans Union. You can view it once annually at AnnualCreditReport.com, but checking it more than that will lower it. Checking it too often makes it look like you are getting ready to take on a lot of debt. So, be a little conservative here. How to Build Good Credit Summary That is how to build credit, basically be smart about it and use credit cards now and then. Overdoing it can lead to debt, but using it in modesty can lead to a better future. Related Articles to How to Build Credit History Return From How to Build Credit to Extra Income Ideas |