Building Credit

ESL

Credit is your reputation as a borrower.  Some benefits to having a good credit score include enjoying lower interest rates and saving money on insurance and security deposits on new utilities and cell phone service.  Important credit factors are your payment history, level of debt, credit age, and recent credit.  They key is controlling your credit to achieve your financial goals.

Other tips include paying all bills on time, be organized and pay attention to payment dates, sign up for automatic payments, always pay at least your minimum monthly payment, and keep your contact information current.

You should always try to keep you credit card balances low.  Charging more than 30% of your credit limit can be very risky.  Credit card companies usually report the balance when your statement closes, so keep the balance low.  Although credit cards are the most common example, other things influence your credit as well.  These may include loan balances and line of credit.  Always keep your debt as low as possible.  Do not cancel old credit cards.  Your card issuer will discontinue sending updates to credit bureaus and the scoring formula places less weight on inactive accounts.  After ten years, the credit bureau will remove the account’s history.  This will shorten your average credit age and cause your credit score to drop.

Mistakes do occur.  Always keep records of checks written, credit card transactions, and ATM usage.  Always keep an eye on your credit score and report possible discrepancies immediately.