In order to maintain and keep a good credit score – especially in this day and age where being credit worthy has never been more important – one has to have a lot of common sense. What does maintaining and keeping a good credit score entail? It entails simply paying all of your bills on, or before, the date due. Paying your bills late will go against you in the long run,and you may end up paying interest on top of your original total.
If you are a young adult, just starting out in life, then nine times out of ten you will not have a credit history. This is good because then you are starting out ‘fresh’ so-to-speak. Open a bank account. By doing this you will be giving off an air of financial stability, this is something that lenders look for when, and if, you are applying for a loan.
Savings and current accounts are also good indicators that you can be trusted. However, until you reach the age of 18, it is against the law for you to apply for a credit card – although banks will allow you to open a bank account. You cannot be legally held to a contract below the age of 18, so applying for a credit card in your own name is out of the question, for now.
As stated above, paying your bills on, or before the due date will build up your credit score. Also, another thing that will help build your credit, is how much credit that is available to you that you actually use. Pay all of your bills by direct debit, by doing this, you will keep on top of them – as money will be automatically taken from your account on the due date.
However, any missed payments [if you do not have enough money in your account to cover the bills that are due – will see you ruin your credit score before it has even begun. Always make sure that there is enough money in your account to cover any bill that is about to come out. Late payments of bills [or missed payments of bills] will not only see you obtain bad credit against your name, but you will accrue bank charges too.
If you want the best possible credit scores, then keep your spending down to around the 30 per cent mark. Even better, would be if you aimed to spend only around 10 per cent of your credit, just watch your credit rating soar if you can maintain that type of spending. Again, if you want your credit rating to rise even further, consider opening up a joint account, or get somebody you know who will co-sign for you.
However, you must be aware that any debt you build up will fall on your co-signatory,if anything where to happen to you [ie, death], By adding yourself to the credit card of somebody you know, or by opening up a joint account, both are the quickest ways to build up your credit score. When somebody you know co-signs for you, you will be able to apply for loans that you may not have been able to get in the past [because of your age]. This loan – for that is what it will be – will appear on your credit report. Pay this debt off, and your credit rating will soar.
However if you, for any reason, stop paying the loan you owe, you must remember that you will not be the only one that the credit agency will come after. Your co-signer will also be the one who they will come after too. By co-signing the contract, your partner/friend has more or less stated that they will also be responsible for any outstanding debt. If you abscond, then that bad debt will show up on their credit rating too. So,think carefully before you ask somebody you know to co-sign. Are you absolutely sure that you will be able to pay off the whole loan?
if your mother or father adds you to their credit card, and if they have handled their financial affairs well, then that will reflect back on you also. In other words, their credit history can be imported onto your credit file, giving you an instant credit record. However, if your mother or father has not handled their financial affairs well on their card, then any debt on that card will fall on you. Their debts would become your debts. Obviously, this would make it even harder for you to obtain credit in the future, because your name would not be credit worthy..
Never max out your credit cards, as this could go against you in the long run. Spend only 30 per cent [ten per cent would be better] each month, and keep your debt under control. Remember that APR [Annual Percentage Rate,that is applied to credit cards} will only kick in if you are late with your payments on the credit card. APR does not kick in if you pay all of your credit card bill, on or before the due date.
A lot of other things could also boost your credit rating too, such as being married, being in employment; owning a bank account, owning a car; owning a catalogue; being on the electoral roll, etc etc. Each one has their own score that credit agencies will judge you by. This record of your life tells the credit agencies how stable [or indeed, how unstable you are],and whether or not you are trustworthy.
I hope this article has been off interest to those who wish to build up their credit score. Although this article is mainly aimed at young people just starting out, the information here should help anyone who needs to build up a good credit record.