5 Simple Ways to Build Your Credit

Fun fact! A poor credit score could potentially cost you hundreds of thousands of dollars. Let’s look at a 30 year mortgage for a home that is $300,000. Those with a low credit score of 559 could end up paying $105,000 more over during this 30 year period when compared to someone with an excellent credit score of 720. Those with poor credit scores can have a much higher mortgage rate, but this doesn’t have to be the case for you.

Building your credit score is honestly a less daunting task than it sounds. Luckily for you, we’ve compiled five easy ways to build your credit. 

Be Smart with your Credit Card

Always pay on time

Perhaps a no brainer for some, one of the easiest ways to build credit is to pay off your credit card balances in full at the end of each month. Your payment history makes up 35% of your credit score, so paying on time is crucial. For many credit cards, automatic payments can be set arranged so that you never miss a payment. 

In addition, a general rule of thumb is to never borrow more than you can pay back. Spending beyond your budget can result in an unpaid balance, and left long enough, will generate high interest rates and a lower credit score. If you absolutely cannot pay off the balance for that month, make sure you are paying a little more than the minimum payment required.

Keep your credit utilization low

Your credit utilization is the amount you owe from your current available credit. About 30% of your credit score is directly related to having a low credit utilization. Credit card bureaus typically use this as a gauge for credit score, as those who use almost all of their available credit have a harder time paying it off. Aim to utilize less than 30% or under for best results. For instance, if your available line of credit is $1,000, try to only use $300 or less. 

Don’t apply for too many things at once

This rule rings true for credit card applications and other loan inquiries. Every time you apply for credit, a hard inquiry is generated from your credit report. Although inquiries on cars and home mortgages are grouped into a 45 day period, multiple inquiries for new credit card applications can negatively impact your credit score. It’s not worth affecting 10% of your credit score, especially when most bonuses, point systems, and minimum requirements are posted online for you to compare.  Fortunately, soft inquiries (when you check your own score) will not negatively impact your credit score. 

Let your accounts age

For lenders, the length of credit usage provides predictability. New beginners and those with lower credit scores should keep their account open for as long as possible. While opening up credit cards for their sign-up bonuses may seem initially appealing, opening and closing credit card accounts will lower the average age of your accounts and will thus hurt your credit score. 

The only exception to closing unused credit cards accounts are those with annual fees. Shop around and find a credit card that best suits your needs and keep it. As this portion does account for 15% of your credit score, reliability and long-term credit card usage is ultimately beneficial for you. 

Fix any errors in your credit report

According to the FTC, about 5% of consumers have errors on the credit reports that can directly affect rates for any financial lending. In addition, 25% of reports contain errors that have minor negative changes on credit scores. Don’t let this be you! Many major credit bureaus offer free yearly reports. Make sure to check for any potential mistakes and file disputes to get them removed. Your scores should increase within 30 business days once errors are removed from your credit report. 

Build your Credit Score Today

It make take some time, but building your credit is easy as pie with a credit repair company like Go Clean Credit. By using these tricks, your credit score will be up without much effort from your end. 

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