Establishing Your Credit
Don't have credit, or would like to improve your credit? Building good credit doesn't have to be difficult, but it does require time and patience. Follow these tips and you're on your way:
Pay your bills on time.
Credit scores emphasize your most recent payment record. Paying on time raises your credit score. If you've been late, start paying on time!Pay at least the minimum amount required.
You can always pay more - and it's a good idea if you can afford to. But you should never pay less than the minimum.Keep your credit card balances low.
Don't "max out" your credit cards - that can lower your credit score.Don't apply for too many loans or new accounts.
Applying for a lot of credit in a short period of time may concern lenders that you won't manage your debt well. Only apply for credit when you need it.Keep your debt-to-income ratio at 20%.
Generally, you should not have debt that's more than 20% of your net monthly income.Establish credit if you don't have any.
Open a free or low-cost checking or savings account and make regular deposits. Only write checks when you have money to pay for things. And apply for one or two credit cards, use them carefully, and pay them off each month.
Resources
Do you need help getting your credit in order? Find a credit counselor.
Do you know your credit rights? Look at the FTC's information on credit and consumer rights.
Are you credit card savvy? Visit PBS's Frontline Web site for the Eight Things A Credit Card User Should Know.
What if I have nontraditional credit? If you have nontraditional credit (no bank account or credit cards), your lender will work with you to use payment information such as rent and utilities to determine your creditworthiness.
But remember, a bank account is always a good idea and it’s never too late to begin to establish a traditional credit history.