Your credit score has a major impact on whether you’ll
get a credit card or loan (for example, for a home or car)
and what your interest rates will be. A good credit history
can also help you get insurance and an apartment—even
potential employers may review your credit history.
Basically it tells creditors how you’ve managed your
financial obligations to date.
The choices you make will determine whether you establish good credit or bad credit. So, how do you build a good credit history? If you’ve looked at the Budgeting section, this should sound familiar…you make sure that the money you have coming in will cover all of your expenses, including your monthly credit card bill. If you pay at least the minimum payment on all of your bills by the due date each month, you are establishing good credit.
If you don’t pay your bills on time, miss payments at all, or go over your spending limit, you’re developing a bad credit history that could lead to higher interest rates and additional fees like late or overlimit fees, and cost you more money later. To see how your credit score, which is defined by your credit report might effect your interest rates and therefore you financial future, try the Loan Savings Calculator at MyFICO.com.
Fixing a Bad Credit History
Having a bad credit score is a lot like having a bad GPA.
Once it goes down, it’s hard to build back up. But all is
not lost. Bad credit scores happen and can be fixed. It
might take awhile, but it IS possible to get back on track.
Here are some things that can help you build a strong credit
history and improve your credit score:
- Pay credit cards, loans and service payments as soon as they arrive. Avoiding late payments is a great start to your credit history. You may want to consider signing up for Online Bill Pay with your financial institution. This way you can schedule bills for payment when they arrive to ensure they are paid by the due date. Some financial institutions even offer eAlerts to remind you that a bill is due if you use the online bill pay tool. Get more information about online banking.
- If you are having trouble covering your bills, contact your creditors or start working with a legitimate credit counselor.
- Know how much credit you have available on your cards and how much you owe.
- Keep balances low on credit cards.
- Pay off your credit cards rather than moving the debt around.
- Budget for expenses like rent and utilities.
- Balance your checking and savings accounts to avoid overdrafts or bounced checks.
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