Building Good Credit History
Credit history encapsulates your entire financial life. All the credit card accounts, loans you have and your debt repayment history together sum up your credit history. There are multiple factors that can have an impact on your credit score depending upon how timely your loan payments were cleared, whether you filed for bankruptcy or whether the court has ordered you to repay your debts etc. All your financial circumstances reflect on building your good credit history. Therefore building good credit history is like image building for celebrities.
Based on your image or good credit history will someone choose to offer you loans in the future or not. If you have good credit, of course people would want to. So, out here are mentioned effective ways for building good credit history.
How to build your credit
Start small – For a person who has no or very little credit, he/she needs to start off with a small loan. While getting this loan passed, the lender should report of your timely payment record to credit bureaus such as Experian, Equifax or Transunion so that you build credit and not incur debt.
Clear payments – For building good credit History, it helps to pay off all your charges in full at the end of the month. This gives the lenders such as banks or credit card companies the perception of you that you understand and follow the norms of this service very well.
Clear charges on time – Another important trick is to pay off your charges on time so that the creditors think that you are financially very stable and are risk-free.
Avoid exceeding credit limit – Always spend wisely and do not exceed your credit limit. If your total charges exceed your credit limit, then it goes to show to creditors that you are having financial issues thus are not being able to clear these charges or incur your own expenses. If your balance exceeds that amount, you are a clear risk to lenders.
Tally credit report – From time to time, you must tally your credit report with actual facts. If your credit report is showing incorrect information of your credit score, it will jeopardize your image in front of lenders.
Use debit card – You can use your debit card as second line of defense. Although a debit card does not help you building good credit history, it can at least help you in not decreasing your credit score since you will be clearing payments through the balance that you have in your bank account rather than taking loans to clear other loans.
Increase credit line – After possessing a credit card for 6 months to a year you can apply for a credit line increase which shall keep your debt-credit ratio in check. This really helps since it is a critical factor in determining credit score.