Why Building a Strong Credit History Matters
Many people assume that if they don't plan to take out a mortgage or apply for a credit card, they don't need to worry about establishing a credit history, but that's not true. While good credit is important when you want to get a loan or a credit card, it's also used to make other decisions, including whether to:
The reason a strong credit history is important to insurers, landlords, and employers is that it provides information about how well you handle your financial obligations.
The Basic Steps to Building a Good Credit History
When you're just starting to establish a credit history, there are some factors lenders may consider to decide if you are credit-worthy, including:
The next steps in the process focus on getting credit and using it wisely.
Keep Your Credit Score Healthy
Once you've established your credit history, it's equally important to keep it in good shape. In addition to paying all your bills on time, it's wise to keep any credit card balances low and pay them down as quickly as you can. You should also avoid getting close to your credit limit because this can lower your credit score.
Check your credit score and, if there are errors, dispute them in writing with both the credit reporting company and the lender that provided the incorrect information. Be careful when checking your credit score. The only free report is available through the government's Federal Trade Commission at annualcreditreport.com.
This article is for informational purposes only. For personalized financial advice, you should contact a qualified financial advisor.