How to Build Good Credit

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By ACGaughen
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Build Good Credit

Building good credit is crucial and tough to do--it will decide whether or not you get your dream house, a loan, a new car, and the better your credit score is, the less you'll have to pay in interest and fees. Here's the basics on making your credit work for you.

Difficulty: Easy

Instructions

Step 1

Get Some Credit. Don't shy away from credit cards, debt, or loans. These are instrumental to getting you what you want later in life. Get a credit card and do something very small, like put your groceries on it every month, and pay it off so you get the benefits of a credit history without interest rates.
Step 2

Always Pay On Time. This is absolutely crucial. The easiest way to torpedo your credit score is to have one late payment. Don't do it!
Step 3

Request a Higher Limit. Don't use it, but part of your credit score is based on a ratio of credit extended to credit used. So if you have say $20,000 in credit extended to you but you're only using $5,000 of that, you look like a very responsible credit consumer and your credit score goes up.
Step 4

Protect Yourself. Look at your credit report once a year so you can see if any erroneous notations are on there and fix them immediately. You can also use this as a way to keep track of what you're doing.
Step 5

Length is an Issue. How long you've had your credit cards is an issue--you have to have had them a minimum of three years to have a "decent" credit history and credit score, and five years to have a good to excellent credit score. Additionally, the longer you've had a card, and the higher your credit score becomes, the more eligible you are for lower rates.