For most of us our credit report and score is very important. Having a good credit score and keeping it that way is not easy since credit is a very fragile thing and has to be maintained. Keeping your Credit intact is very important if you’re like most of the population and rely on loans to make large purchases on things like a car or new home. This is due to the fact that finance companies and banks use your credit report and score to determine your eligibility for such loans. Obviously your income is important as well but your credit determines your credibility and how likely you are to pay back the loan. It is also a little known fact that many employers look at your credit report before offering you employment. For these reasons and others attaining and maintaining good credit is essential in today’s society.
To begin your journey to good credit you must, absolutely positively must live within your means, this concept is simple it basically means you must budget your money and you don’t under any circumstance spend more than you make. To give an example of what I mean by this consider if you wanted to purchase a new car and let’s say that you have looked over your monthly budget (which everyone should have) and it shows that you can realistically only afford a car payment of $400 a month. You shouldn’t then go out and purchase a car for $600 a month no matter how cute the car. The idea is to make sure that your bills aren’t higher than your income. You can only spend as much as you make every month. It wouldn’t be realistic to make $2000 dollars a month and have your monthly debts total $2500. In fact it is best if your bills total less than 50% of your income. This may not always be possible but it is a goal to strive for. Another little known fact is that your debt to income ratio (your amount of debt versus the amount you make) is also another key component that is taken into consideration by credit card companies, employers, finance companies, and anyone else that has an interest in your finances.
Also pay your monthly bills on time. Late or missing payments can negatively impact your credit rating. You may be surprised to learn that being late on a payment even once can drastically lower your credit score and make you appear unstable. Therefore it is imperative that you try to pay all of your bills on time or early if you can. Obviously there are times when things come up and you may have to be a little late on a payment this is understandable but I suggest if at all possible having some extra money put back for just an occasion. If you do find yourself in a jam contact the company, explain the situation, and see if there is any assistance they can offer to avoid having a negative mark placed on your credit report. Often times these companies will be willing to work with you if you have a good history with them and usually make your payments on time.
If you don’t have any credit try building some by applying for a LOW interest credit card. It is important to note that credit cards and finance companies will only help your credit score if you use them wisely. A good practice is to never go above half of your credit limit, pay the bill on time, and always pay more than the minimum due. And don’t under any circumstance rely on a credit card to supplement your income. A good practice for me is to put only small purchases on my credit card and pay off almost the entire purchase right away. I try to keep a small balance on the card just to keep it open and build credit history.
Next check your credit score and report often. There are agencies that will give you access to this score for a small fee. Many of these agencies will also give you access to tools and information that will help you improve your credit standing. You may also find resources to help with identity theft and fraudulent debts. When viewing your credit report if you find unacceptable items such as a debt sent to a collection agency contact that company immediately. Sometimes these agencies will be willing to remove the debt from your credit report if you pay it off.
Finally remember that it takes time to build credit and many things such as applying to many finance companies, having too many credit cards/financed items, and not paying your bills on time can negatively impact your credit score and report. So be patient, carefully monitor your credit, and be proactive about building and keeping your credit.