What's the best way to build up my credit?

Question

I just finished paying off some credit card debts I had for a year or two (I'm 22).

In the next couple of years I'd like to get an apartment, a loan and a new car.

What's the best thing I can do right now so that my credit is excellent when I want to do these things?

I'd really prefer NOT to have a credit card at all, but is that my only way?

Thanks!

Answer 1

You have to have something reporting to the credit bureaus in order to build good credit. To be honest with you, credit cards are the best thing to build your credit, besides a car or mortgage.

Just get a couple of credit cards and keep your balances to around $300.00. Pay at least the minimum monthly payment every month. This will build your credit up quickly, but won't put you into a lot of debt.

Answer 2

Here is the simplest way to get to your goals...

USE your credit cards but pay them in full each month. Pretend it is an ATM card and transfer money in the same amount from your checking account to a savings account (free at most banks). At the end of the month - use the same money to pay the cards.

Credit score is calculated in part by your limit and how much of it you use but you also need to use it to establish responsibility since the last 24 payment cycles report whether or not you made a payment...missing payments with no balance due DOES NOT help your score.

Credit scores also take in ability and responsibility so paying monthly proves both. The next factor is length of time accounts have been open. Closing an account may not count against you but then it ceases to benefit your "length reported" because it is no longer active.

Some of your answers to this question are outright wrong!

Do not get a Capital One (high risk) or any of those types of cards. They seem to always report negatively - on everyone!!!

Another easy deal is setting yourself up with a secured card at your bank - even if your credit is good - so that the "security" can be used to pay the payments using an auto pay feature to make sure there is never any fees, interest or late charges AND the higher the security amount, the higher the statement will reflect as available credit.

Answer 3

Definitely don't get rid of your credit cards! If they're paid off, leave them that way and lock them up so you can't use them. If you cancel the cards, then you're also cancelling your term with that creditor. What that boils down to is this: The longer you hold on to a credit card in good standing (paid off is a great standing to be in!) the longer that you're showing actually -having- an account in good standing and that helps your credit. Also, if you make purchases with those cards that you have the immediate funds in your bank account to cover, pay the card immediately. This shows that you pay off your balances on time and quickly. This helps your credit.

If those are the only debts you have on credit and your credit is clear, I don't think you'll have ANY trouble at all getting approved for those things that you want.

If you think you can handle the responsibility, sift through the jillions of credit card offers you're probably getting and apply for one of them that has a credit limit up to $4500. (There are levels of credit. I'm not sure how many, but I know intermediate levels top out at $4500 and then get huge from there on up.) Get that card, and then do the same thing as stated above. Make charges on them, and pay it off immediately. You don't have to make thousand dollar purchases on it for it to be noted on your account that you're responsibly handling a large dollar credit account.

Other things that you can do are keep your cell phone company. If you keep your cell phone company, you're building reliability with them as well. (So long as you're paying on time.) By owing them money, they are a creditor to you and that plays into how you credit score works. Do you own a car or are you making payments on one? If so, regularly pay at least five dollars over what you own on it for the month. This will up your credit score by showing that you're not just making the minimum payment. Handy lil' tip isn't it?

Whatever bills you have pay off as soon as possible. Make more than the minimum payments on bills and keep your credit accounts active! -That's my best advice on the subject!

(Oh, and I forgot to mention - Credit is also judged on how much you HAVE and how much of that you USE. So if you have $5000 credit, and you've only used $300 of it, that's a good thing!)

Answer 4

As one of the other members wrote; in order to build credit you must HAVE credit.

If you credit is not the best; the best way to build credit is to get a secured credit card (ex. you give the bank $500, and they give you a credit line of $500).

If you have existing credit cards DO NOT close the accounts....the BEST way to build credit is to have open accounts for long periods of time to show that you are reliable and consistant.....so hopefully you havent close those accounts you had open...if not, as least you know now :)

Good Luck !

Answer 5

Well in order to build credit you must have credit. If you have no credit or small debt start with a small balance credit card and keep charges to a minimum. Then in a few years you will be fine.

Answer 6

The other members have given you all the information you need. I will only add that you don't want all that hard work to come crashing down because of Identity Theft. You have to put that in your plan also : protecting yourself from Identity Theft. There are a few good resources online that will give you useful tips.

http://financialbasics.blogspot.com/2006/11/its-not-me-preventing-and-dealing-with.html

http://financialbasics.blogspot.com/2006/11/its-your-credit-take-care-of-it.html

I hope those 2 help...

Answer 7

well you've paid them off so just wait, in time your credit will get better and your score will go up but that takes time.

Answer 8

pay your bills on time.