How to Build Good Credit
You have made it this far, congratulations are in order. This step in the good credit guide you should have already have your credit score, fixed errors in your credit report, begun to dispute negative items in your credit report, and are diligintly working to reduce your debt. This module of our good credit guide is all about strategies on how to build good credit lines that help improve your credit score. Review our guide on how to build good credit and use the strategies that would work best in your situation.
Building good credit as a means of establishing a responsible credit history is essential for your financial future. Let us now begin our free guide on how to build good credit.
This module of the good credit guide will teach you:
- How to build good credit with new loans
- How to build good credit with credit cards
- How to build good credit correctly
- How to build good credit responsibly
We must start again with a thorough assessment of our current credit situation. How many loans, credit lines, and or credit cards do you currently have outstanding. Then assess how much you owe on each of these credit lines, and then account for how much credit is available for each of these accounts. Any sound how to build good credit strategy has a goal to maintain an ongoing responsible credit history with a series of reporting lenders while maintaining maneagable credit balances.
When considering how to build good credit we want to laser in on particular categories of debt, use these resources to find new lenders:
- How to Build Good Credit With Credit Cards
- How to Build Good Credit using Home Loans
- How to Build Good Credit using Car Loans
- How to Build Good Credit using credit lines
- Use Student Loans to Build Good Credit
Avoid these types of bills as they do not help to build good credit:
- Short term loans 10 months or less
- Private loans from friends or family
- Car loans from small dealerships that offer private financing
- Rent or utility bills
- Recurring service bills, such as cell phones, or newspapers
How to Build Good Credit Using Credit Cards
Credit cards are an excellent way of building good credit if they are managed correctly, be careful to not over spend but use them as a tool to attain your goals. When asking yourself how to build good credit with credit cards we suggest you get the best credit cards your credit can qualify for, and use your cards for with moderate frequency and maintain a balance in the 30-40% range of your available credit. It is essential when you want to build good credit to only have four or less open credit card accounts at a time, any more and it will decrease your credit score rather than help build good credit. Maintain on time payments at all times and do not let your credit balance creep above the 50% mark of your available credit.
How to Build Good Credit Using Home Loans
A home loan is a good means of building good credit if you manage it responsibly. When considering how to build good credit with home loans it is essential you buy within your means, with a reasonable payment for your income. Lenders look at your debt to income ratio and will assess your risk based on this. A good credit rule is to keep your mortgage payment at a level where it causes you minimum stress, then it will cause creditors little stress when assessing your risk for a new loan. If your payment is excessive on your current home, consider a mortgage refinance or downsize to build good credit. And never forget, the how to build good credit guide always recommends you maintain on time payments!
How to Build Good Credit Using Car Loans
Determining how to build good credit with car loans is easy. A history of on time car payments, with financing terms that do not strain your budget can help build good credit. As with all other credit lines, your overall debt to income level should be taken into consideration, but a car loan helps you establish a long term good payment history. If you have few credit lines, consider borrowing against your car to establish a history when considering how to build good credit. Again, our how to build good credit guide sugests you always make on time payments!
How to Build Good Credit Using Credit Lines
We can also use credit lines to build good credit with the same approach to the previously discussed loans. Most people do not know how to build good credit using credit lines properly. To most positively affect your credit you will want to explore long term manageable credit lines to establish a positive credit history. When considering how to build good credit with lines of credit, a home equity line of credit is the best option. Use a small portion of the loan, leave the rest in reserve and then make on time payments to establish and build good credit. Avoid short term personal loans, or credit lines from family members or private financiers as they will not help to improve your credit.
How to Build Good Credit Using Student Loans
A student loan is an excellent tool to build good credit because the financing terms are long term and often include excellent rates and conditions that keep the monthly payments very low. If you are looking to build good credit, and have few credit lines open or have a limited credit history, consider enrolling in a class at your local community college, and get a student loan. You can often get a loan that includes extra expenses which will help put money in your pocket, and at nearly unbeatable rates. When I start a client considering options on how to build good credit, a student loan is usually where I start. A student loan to build good credit is one of the best means of improving your credit available.
*How to build good credit update - with the recently passed stimulus bill, student loans have become an even better tool to build. For more information on how to build good credit using student loans, be sure to check out our upcoming guide on student loan financing for good credit.
How to Avoid Good Credit Mistakes
You have completed the how to build good credit module, congratulations! You have now begun to build the positive credit lines to establish a good credit history and are well on your way to improving your credit. The next step of the good credit guide will outline the pitfalls of good credit you will want to avoid to stay on track.