Repairing poor credit is far from a quick fix — and the same applies to building a positive credit history. Both take time, patience, and careful planning. That said, there are a number of simple techniques you can use to cultivate a positive credit history.
But first, a quick overview of how credit scores work. They range from 300 to 850, with 850 being the highest score a person can have. And while consumers should strive to achieve a high score, those with a credit score of 800 can in most cases enjoy the same terms and interest rates provided to people with a “perfect” score. Moreover, you shouldn’t run into much trouble getting approved for a loan with a score of 600 or higher.
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Tips to Create a Positive Credit History
The following five tips will help you improve your score and build a positive credit history.
1. Stay current on your credit card payments
Make regular payments to your credit card company. Credit issuers prefer to see lower credit utilization ratios — that is, your outstanding balance on all credit cards compared to the sum of each card’s limit.
If you are using less than 30% of the credit available to you each month, you should be on the right path to boost your score. Setting up auto-pay for recurring bills is another effective way to ensure timely payments.
2. Request a higher credit limit
While this option is subject to your credit issuer’s approval, it’s a fantastic way to increase your credit utilization ratio. In fact, your credit utilization ratio is one of the most important factors in determining your credit score. Therefore, with a higher credit limit and the same spending each month, you can begin to boost your credit.
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3. Apply for a new credit card
If your credit card company doesn’t approve your appeal for a higher limit, you can apply for a new credit card. Note that your credit score might go down temporarily in this case. Hard inquiries on your credit history are typically conducted when you apply for a new account, and they tend to affect your score. The idea here, however, is that your new card will more than make up the difference when it comes to strengthening your credit history
4. Become an authorized user on another person’s credit card
This is a fantastic way to build a positive credit history from the ground up. If you can’t open a new credit card, consider asking someone else — someone with strong credit — to add you to their account. As an authorized user on another person’s account, the original cardholder’s on-time payments will help you improve your own record. In addition, the credit card limit will be added to your existing limit, which will further reduce your credit utilization ratio.
5. Check your credit score and report any errors
Credit card companies make mistakes from time to time, and a simple error can bring your score down without your even knowing it. Accordingly, reporting the error could give your score an immediate boost (and improve your credit history as a result). The Federal Trade Commission claims that 20% of consumers who dispute errors on their credit report see their score go up as a result.
All of the above mentioned tips can help you improve your credit score. With these tools in your arsenal, you will be on track to build a positive credit history.