A strong credit score is important if you want to buy a house one day. Whether you’re new to credit or want to see your score go even higher, here are some expert tips on building healthy credit!
Pay All of Your Bills on Time
It may sound simple, but this is one of the most important factors in how your score is determined. From a lender’s perspective, a person’s ability to keep up with their credit card payments indicates that they are capable of taking out a loan and paying it back. But your credit score isn’t just impacted by your credit card bills. You need to pay all your bills on time, including all your utilities, rent or student loan payments.
Don’t Hit Your Credit Limit
Just because you have a high credit limit does not mean you should keep your balance up to that limit. Experts recommend keeping your total debt below 30% if possible. If you get too close to your limit, creditors may think you are biting off more than you can chew, or that you’re supplementing your income with credit.
Only Spend What You Can Afford
A credit card is not a permission slip to buy things you cannot afford. In fact, overusing a credit card is the quickest way to get into debt and credit trouble. The best way to build good credit is to create the habit of charging only what you can afford. This habit lets future lenders and creditors know you are a responsible borrower, plus this healthy habit helps you avoid excessive debt.
Don’t Apply for Every or Just Any Credit Card
Applying for credit cards can damage your credit scores. Just a single application may shave a few points off your score. But multiple applications for cards in a short span could suggest you are a riskier borrower than someone who applies less often. Instead do some research and pick a credit card with an ideal credit limit and low interest rate. Other features to consider include low or no annual fees and rewards on purchases.
Establish a Healthy Credit History
Establishing a solid credit history means having credit accounts that are open for ten or more years. Even if you pay off the debt and are no longer using your credit card, you will want to keep the account open, especially if it doesn’t have an annual fee. Your unused credit line will help you lower your credit utilization ratio and lengthen your credit history.