Basic Steps to Build Positive Credit
Knowing how to build positive credit can prove invaluable when it comes to boosting your credit score and becoming entitled to low interest credit products. This article will provide you with a brief insight into how you can build your credit, even if you currently have a low credit score.
Many people mistakenly believe that to boost your credit rating you simply have to spend as much as you can on your credit cards, and then pay them off in full when the statements arrive. Not only is this not necessarily the case, it can also do you more harm than good in some situations.
One of the key areas analyzed by credit businesses when calculating an applicant's credit score is their amount of available credit. If you utilize the above tactic and they happen to perform their searches during a time when you have spent heavily on your card, it will appear that you have virtually no available credit and have 'maxed out' your cards.
Putting large amounts of spending on your credit card will also give the appearance that you are spending beyond your means, even if this is not necessarily the case. In summary, the 'put it all on the card then pay it all off' approach will not help to build positive credit.
On the flip side, having huge amounts of available credit is not always a good thing either. Perhaps the best strategy is to utilize between 10 and 20 percent of your available credit, as this shows companies that you will use your card, but can also manage your finances efficiently.
If you do not have a credit card it is a good idea to get one. Even those with low credit scores can get approved for bad credit credit cards, and as long as you stick to the above 10-20 percent rule you will not accumulate large amounts of interest. When applying for these cards, make sure that they offer reporting to the major credit bureaus.
With any credit card it goes without saying that you should make the repayments on time every month, never missing them or being late. As long as you as you pay at least the minimum amount before the due date your credit score will slowly but surely creep up.
Another great way to build positive credit is to apply for a small, low-interest personal loan, and make the payments on time every month. In fact almost any form of credit can help you build positive credit when used in an appropriate and responsible manner.
The last tip to put you on the path to build positive credit is to get a copy of your credit report, and check that all your credit information is correct. Incorrect data can be contested and amended, and removing items such as incorrect late payments can give you a healthy credit boost.
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