Good credit is a key ingredient in succeeding financially; yet building a strong foundation takes time. If you are new to credit or are working to improve it, there are many steps you can take to put you on a path to stronger credit.
Here are three essential steps that help you get started:
• Check your credit report: Experts recommend checking your credit report at least once a year. Your credit report contains details of your credit history, including balances, credit limit and payment status. Lenders, apartment managers and some employers may check your credit report to see how responsible you are with money.
When you check your report, make sure it contains current and accurate information. If you find errors, correct them as soon as possible because they may negatively impact your credit score and even indicate possible identity theft. You can request a free copy of your credit report from each of three major credit reporting agencies — Equifax, Experian and TransUnion — once each year at www.AnnualCreditReport.com or call toll-free 1-877-322-8228.
• Make sure you’re paying your bills on time: Life happens and you may find yourself forgetting to pay a bill on time. Because your payment history is one of the biggest factors in your credit score, it’s important that you stay organized and keep track of all your bills. This applies to more than just credit card bills, but also when it comes to rent, utilities and cell phone payments.
Using free online tools, often available through your financial institution’s online banking, can help your develop a budget and create an automatic bill payment schedule. Many financial institutions also allow you to change your payment due dates for one that is convenient for you. If it helps, you can organize all your payments to be due on the same day of the month.
• Make a budget and stick to it: One of the best ways to keep up with your bills is to closely monitor your spending. Creating a budget can help you decide when to use credit and when to hold off on a purchase. Keeping a budget is also helpful because lenders look at the amount of debt a consumer has compared to their income.
As an important rule of thumb, keep debt at no more than 35 percent of your income or lower. This will tell lenders that your debt is at a manageable level relative to your income, and you are likely to have money left over for saving or spending after you pay your bills.