Whether you are seeking personal loans, looking for a new car or apartment, or even looking for a new job, your credit report can be your best friend or your worst enemy. These days, our credit affects much more than simply how much money we are able to borrow from the bank and what interest rate we’ll need to pay. Every aspect of our lives in today’s world is touched and affected by credit.
So, how do I build good credit?
That largely depends on where you’re coming from. The first thing to do is to know where your credit is right now. You can check this from any number of free Internet sites which allow you to check your credit scores with the three major credit ratings bureaus: Equifax, Experian, and Trans Union.
If your credit is good, you’re doing something right. Still, you’ll want to make sure your entire report is correct. Even seemingly small transgressions like a late payment here or there can hurt you in the long run, and you’ll want to make sure that anything negative on the report at all is accurate.
If your credit is not so good, you have some work to do. Fortunately, credit scores can start to rise fairly rapidly if you just start paying off old debts. Look your credit report over, and make at least some payment on every bill you owe, while trying to pay them off one at a time. Even if you are unable to make full payments, show that you are trying to pay your bills off. Your show of good faith will improve your credit score (or at least mitigate how much it is hurt).
If you haven’t established any credit one way or another yet, you have a clean slate. Unfortunately, it can be tough to get personal loans or any other kind of credit if you have no credit history. Many banks will lend to those with poor credit before they’ll lend to those with no credit. One of the best things you can do for yourself is to take out a small loan. You’ll probably need to present something as collateral, so be prepared for this. Once you have the loan, make the payments on time. Better yet, make the payments early.
Don’t pay off the loan too soon, though. Believe it or not, if you make a habit of paying off money you borrow from a bank too quickly, they are hesitant to loan again. Banks make much of their profits from the interest on loans, and someone who pays all of their loans off way ahead of schedule means the bank isn’t making much on the loan. And that can make them hesitate to loan more money.
Slow and steady is the rule. Don’t borrow a lot of money you don’t need, but borrow a little here and there, and pay it off one month at a time.
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