Without a solid credit history you will often find it difficult to do kanything from getting a loan to getting approved for credit cards. Good credit will be your friend later on down the road when you do move away from rentals and are looking to put a down payment on a house. If your credit is less than perfect have no fear, with a few simple tips and change of behavior you can build great credit for your future purchases.
1. Check your credit report
Something that is often overlooked by many people, checking your credit report for errors and correcting them can make a big difference. Be sure to look at all three credit reporting agencies including Equifax, TransUnion, and Experian. If you see there are errors on your report, contact the reporting agency and ask how you can go about resolving the discrepancy.
2. Stay current with your bills
This seems like it would be an obvious thing to do, but so many people think putting the bill off another day or two will not affect them when in reality it does. Missing one bill once will not permanently damage your credit score, but over the course of time these small missed payments begin to add up. If you have a bad habit of forgetting pay the bill as soon as you receive it in the mail or setup automatic payment online. Most banks offer the ability to have your bills drawn directly out of your checking account.
3. Don’t take every credit offer thrown your way
This is very important for new college students and recent graduates. If you fall into this category you’ll begin to receive a barrage of mail from major credit card companies offering things such as “no interest for your first year” or free promotional items if you sign up. Long story short, you’ll end up missing a payment eventually or run up a high tab at the bar that you won’t be able to pay. The pizza you bought 6 months ago will end up costing you as much as a new tv by the time you are done paying the interest.
4. If you have debt, pay off as much as you can
If you are already in a significant amount of debt and feel overwhelmed take a breather and sit back so you can organize every payment you owe. You should make a list of all the debts you owe and organize them according to amount owed and interest rate. Although it’s tempting to put all the debt on a new loan so you can pay one payment, it may be a more affordable alternative to pay individually. Pay off the highest loans first (with the exception of most student loans) and then work your way down the list.
5. Don’t close all of your accounts at once
As tempting as it may be to close all of your current credit card accounts at once, it will be better for your credit if you wait. Closing even just a few accounts in a short period of time can reflect negatively on your credit rather than closing them down one at a time over a longer period of time.
6. Only pay for the necessities
Once you have paid off any credit cards, you can begin to rebuild your credit by making on time payments for small purchase amounts. Try and only place necessities on these accounts such as groceries or gas. Keep the amounts below a few hundred a month or whatever you can afford. The most important thing is to pay the amount in full every month and avoid any late penalties.