You can build credit history by making regular payments. This will allow you to obtain lower interest rates on balance transfer cards or unsecured credit card, which may be necessary in an emergency. This will allow you to get lower rates on mortgages and car loans. You will be able to get lower rates on car insurance if you have good credit. Many landlords will also use your credit score when screening potential tenants.
Pay your bills on-time
To avoid late fees, you must pay your bills on the due date. Late fees are costly and can make planning your monthly budget difficult. It can quickly spiral into a vicious cycle that makes it nearly impossible to pay your next bills. There are several ways that you can make paying your bills promptly a habit.
So you are aware when your bills will be due, create electronic reminders in your calendar. The reminders should be sent at least five business days prior to the due date. This will help you avoid missing payments due to time zone differences.
Keep balances low
Maintaining low credit card balances is one of the best ways you can raise your credit score. Experts suggest that you keep your balance below 30% of your credit limit. It's better to pay down debt than to transfer it into another account. By paying your bills each month, your credit score will improve by reducing your debt.
Credit utilization accounts for about 30% of your FICO(r) score. If your credit utilization ratio is over 30%, it indicates that you're financial dependent. If your credit utilization is low, it means that you don’t rely on credit cards as your primary source for income.
A long credit history is important
A long credit history is a key aspect of building credit. Your credit score is determined by many factors such as your payment history and how much you owe lenders. Pay your bills on schedule and maintain a low credit utilization rate are the best ways to build a good credit history.
15% of your credit score is determined by the length of credit history. Accounts that have been active for more than two years can boost your score. Don't forget to pay off any outstanding credit cards. Having a long credit history will help you get a lower interest rate on loans and credit cards.
It is better to have lower utilization
You must keep your credit utilization rate low in order to improve your credit score. While it may seem daunting to keep your ratio under 30%, there are simple steps that you can take. Lower utilization rates indicate better financial health. This will allow you to get credit whenever you want it.
The first step in applying for a new credit card is to request a card with a higher limit. Opening a new account will increase your total credit limit and lower your credit utilization ratio. This will not raise your credit score. However, opening another account will increase your total credit limit and lower your credit utilization ratio.