How to Build a Credit History

Many people avoid signing up for credit cards because they're afraid of going into debt. However, many eventually get credit cards anyway to build their credit. In order to make a major purchase, like buying a new car or home, you need a solid credit history to help you get the best loan or mortgage. There are a few ways, other than getting credit cards, to build a credit history.

Instructions

Difficulty: Moderately Easy

Build Your Credit History

1. Pay your monthly bills on time. Some utilities, like your phone bill, are used to generate your credit score. You can avoid late charges and easily build a credit history by making the extra effort to send in payments on time.
2. Set up a student-loan repayment schedule that you can manage. The first major loan for most people is for education, and your credit history will start on the right foot if you make payments on time. Remember that you can often consolidate your federal loans to keep interest rates down.
3. Sign up for a low maximum on your credit card. If you plan to pay off your card each month, get one with low fees. If you want to carry a small balance on your card from month to month, shop for a credit card with a low rate.
4. Plan to occasionally run up a large balance on your credit card, and then pay it off over 2 or 3 months. You can build up a credit history faster if it appears you're taking a risk with your card. Luckily, if you budget to pay off your card, you won't risk debt, and your credit ranking will stay very good.
5. Open both a checking and a savings account at your bank. Building up your savings account over a long period of time is a good way to establish a credit history without taking any kind of financial risk.

Tips & Warnings

• College can be a good time to get your first credit card because you're likely to be bombarded with offers. Be sure to use your card responsibly to ensure that you're building a good credit history.
• Failing to pay bills on time and having a long-term outstanding balance on your credit card will build your credit, but this is not the kind of credit you want.
• Be sure to make payments on time if you have a loan cosigner because late payments will hurt the other person's credit too.