How to Build a Good Credit History

Building a good credit history is essential to anyone who expects to make major purchases, rent an apartment, start a business or get clearance for a corporate job. Building good credit is actually easy to do - if you pay attention to your expenses. Follow these steps to help build your credit history.

Difficulty:

Easy

Instructions

1. Know which accounts are shown on your credit report.

2. Request a copy of your credit report at least once a year.

3. Check that the information shown on your report is accurate.

4. Pay all of your bills on time. You don't need to pay the entire balance each month, but make at least the minimum payment promptly.

5. Avoid going over the credit limit on your credit card account. Some credit card companies allow you to do this as a courtesy, but it can reflect poorly on your ability to handle your account.

6. Cancel credit cards you aren't using or don't anticipate using.

Tips & Warnings

• If your application for credit is denied, you're entitled to a free credit report. The denial letter you receive should list the credit bureau used. Contact that company for the copy of your credit report.

• If you don't understand the report, contact the credit bureau or your local consumer credit counselor.

• Setting up an automatic payment plan with your credit card company can help ensure that you never miss your minimum credit card payment.

• If you never use credit of any kind, it doesn't mean that you'll have a great credit history. Most lenders prefer to see a history of credit and debt payment.

• Avoid "shopping for credit." Each time you apply for a loan or credit card, an inquiry from that lender will be reflected on your credit report. Too many inquiries can signal to a potential lender that you're a risky customer.