You want good credit, and you want it yesterday. But you can’t buy good credit at the store — even with cash — and you certainly can’t build it in a day.
Your credit score and credit report are built over time, and because they provide a complete picture of your credit over the years, they simply won’t happen quickly. But there are steps you can take right now to help ensure the track record you are creating is a positive one — one that will lead to good credit and all the benefits that follow.
1. Check your credit score and get a copy of your credit report
The best-laid plans begin with a starting point. If you’re chasing good credit, it helps to know what you’re working with at the beginning. You’re entitled to one free credit report every year from each of the three credit reporting companies in the U.S. Also, you can find out your credit score free with some credit cards or for a fee at websites.
2. Get a credit card
If you don’t already have a credit card, search for the right credit card for your situation. Secured credit cards are one option for people with no credit or a bad credit history. These cards require a cash deposit, but this means you will have credit available if traditional (unsecured) credit cards are more difficult to obtain.
Another option, if you prefer a no-deposit unsecured credit card, is to find someone to co-sign your credit card application. You can use the good credit of someone you trust to your advantage in getting a lower interest rate and better terms for a traditional card.
If you’re a student, check out NerdWallet’s guide to the best student credit cards.
3. Make consistent, on-time payments
Your credit score is calculated using several factors, but 35% of it is based on your payment history. Set up automatic payments or schedule a regular reminder on your phone. Just make sure you pay your bill every month.
4. Use your credit card, but not too much
You’re establishing a credit track record, and you can’t do that without using your credit card. So, use it. But keep your credit utilization to no more than 30% of the limit on your account. This is called your debt-to-credit ratio and it accounts for 30% of your credit score. By using only a portion of your available credit, you’re showing you responsibly use your card for reasonable purchases — not to live above your means.
Your credit history accounts for 15% of your credit score, underscoring the importance of building good credit over time. If you check your credit, occasionally open new accounts, make your payments on time and keep your debt-to-credit ratio in line, you’ll build a credit report worth envying.
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