3 Simple Ways To Begin Building Your Credit

Credit is a necessity if you want to purchase items that you don’t have the cash to afford on your own, like a car, home, an education, or other large purchases. However, if you haven’t proven yourself as a good credit risk previously, you may have a hard time getting the credit you need to make these essential purchases. So to help you begin to building the credit score you need to make these larger purchases, here are three simple ways, other than using credit cards, that can help you build your credit. 

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Make Your Payments On Time 

When you’ve made a purchase based on credit, or even if you just have a monthly bill, it’s vital that you make those payments on time. Erin El Issa and Bev O’Shea, contributors to Nerd Wallet, share that having a goal to make 100 percent of your payments on time will be a big benefit to your credit score. By doing this, you prove that you can be responsible with credit and are a good credit risk because you have a track record of paying back your debts on time. And while you might not think that paying on time is that big of a deal, remember that if your bills go to collections, that could severely damage your credit score—something you definitely want to avoid. 

Keep Your Balances Low 

Although it is important that you use credit to build credit, you also want to be careful how much credit you’re using. According to Dana Dratch, a contributor to BankRate.com, the smaller the balance you have on your credit card or other repayment, the better it is for your credit. Especially if you have a large credit limit but don’t need to use the amount you have, this is a good sign that you know how to use credit and work with your credit. Dratch shares that the ideal amount to have as a credit balance at any one time is around 30 percent of the credit limit or lower. By doing this, you again show that you don’t allow the ability to borrow on credit control the way you manage your money. 

Report Your Own Good Credit Usage 

When you make a purchase on credit, your purchase and payment history is recorded and attributed to your credit score. But what about the other payments you make on a regular basis? Because those don’t necessarily affect your credit unless something goes wrong, Geoff Williams, a contributor to U.S. News and World Report, recommends self-reporting things like rent payments and utility bills to agencies like PRBC.com. Self-reporting can help show that you have a good repayment history without having to use credit to prove this point.

If you need simple yet effective ways to begin building your credit, use the tips mentioned above to help you do just that.

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