Building and maintaining a healthy credit history–and a good credit score of 700 or higher–takes responsibility and discipline. In exchange, your good credit will reward you with easy access to affordable credit for buying a home or car, going back to school, or paying for any number of life events. Everybody starts without a credit history. While it’s hard to get credit without a credit history, it can be done, and you can build good credit relatively quickly.
Most importantly, pay all of your bills on time
There is no single more important factor in determining how good your credit will be than whether you pay your bills on time, every time. Paying just one credit card late once can significantly lower your credit score for several years. Paying late more than once will lower it even further, and failing to pay a creditor altogether will almost ruin your credit for up to seven years.
Next, use credit frequently but responsibly
Creditors like to see that borrowers have managed more than just one or two (but not ten) credit accounts responsibly. Additionally, they like to see that borrowers have had both revolving credit accounts (like credit cards) and fixed credit accounts (like mortgages and auto loans). To boost your credit, keep a few credit accounts open, but keep the balances on your credit cards low, as the higher your balance gets to your credit limit, the lower your score will get.
Finally, be patient
The longer you have had credit accounts opened (and paid on time), the better your credit gets. Continue to use credit responsibly and, over time, you’ll see your credit score grow and grow.
Credit 101
We’ve broken down the essentials of credit and how it works into a few easy articles. Take five minutes to learn everything you need to know about this powerful financial tool: your credit.
- What is a credit score and credit report?
- How is my credit score and credit report used?
- How do I get good credit?
- Why do I have bad credit?
- What credit score do I need for a new credit card?
- How do I know what my credit score is?
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