Building and maintaining a good credit history has become more important than it has ever been. This is because, today not only do you need a good credit history while applying for a credit card, phone connection, cable, internet, renting out a house but in many cases even employers check out your credit history to determine what kind of person you are.
It is important therefore to understand the components of your credit and what it takes to improve your credit report.
Generally speaking your credit score consists 35% for history of payment, 30% for your debts, 15% for how long your history has been, 10% for new credit and 10% on type of credit used.
The first step that you need to take in order to build a credit history is to get a bank account, depending on your situation you can get a savings, checking or both. While it is not possible for everyone to get credit cards, most people are able to get a bank account. If you are starting from scratch, then this is the best thing to do. Get a bank account and start off.
Once you start off, next thing to keep in mind is that you need to consistently pay your bills on time. This is an important part of your credit report and if you are not in the habit of paying off your bills on time then your credit will get damaged. Even a single missed report will cause damage and you will regret it later. Keep paying your bills on time and build your credit.
An important part of your credit is, how much of it, you don’t use. That means that if you max out your cards regularly, your credit is likely to be worse off than if you used just 10 to 30% of it. It is always a good idea to spend very little on your card and pay it all on time. This helps you create a good history in a reasonably short amount of time.
These are just some tips that any one starting off building a credit history should keep in mind. Its simple to understand, but sometimes get a little difficult to follow, so be disciplined in your finances and reap the rewards in the long run.
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