Tips for how to Establish a Good Credit and Build a Good Credit Score

Building a good credit rating is essential to many important things in life.  A good credit score can assist you in buying a car or home, renting an apartment, purchasing a good cell phone plan, or even securing a good job. 

Achieving a good credit score takes time and planning.  If you are just starting off, or looking to get a handle on your credit, take time to read your credit report.  There are three credit reporting agencies:  Equifax, Experian, and Trans Union.  You are allowed one free credit report per agency at  

When you review your credit report, you are able to see if there is anything in your report that is unfamiliar.  Open credit cards and closed debts that you know nothing about can indicate identity fraud, and should be reported immediately.  Also check for inaccuracies in dates or amounts owed.  The website allows you to dispute anything that you feel is incorrect.  Take the time to note any debts you are able to pay, to take the first steps in improving your score.

If you do not already have one, open a checking or savings account.  Lenders look for accountability.  Maintain your account well to show responsibility to lenders. 

Next, pay your bills on time.  Financial responsibility is proven when you can show that you pay all bills on time.

The next area you need to focus on is credit cards.  Lenders look to see how long you have managed your card and how much of the credit limit you use.  A borrower who has managed a credit card for years, maintaining a minimum balance is much less of a risk than someone who has only held a credit card for a few months or who has constantly maxed out his or her cards.  Keeping your cards at about 30% of the maximum available credit is recommended by financial advisor, Suze Orman. 

Another way to establish good credit is to have a cosigner.  Someone with good credit who is willing to cosign with you on a loan will give you the opportunity to get a better rate.  If you both manage the loan well together, your rate will improve.

If you have bad credit and are not able to get a credit card, a good start is to get a secured credit card.  A good secured card reports to credit agencies.  It works by receiving a deposit from you in advance, and granting you a credit card.

The last way to improve your credit rating is to try and get an installment loan.  It is important to have multiple types of credit.  Having a credit card (revolving credit), and an installment loan, will help you prove to lenders that you can handle multiple types of accounts properly.  An example of an installment loan would be a loan for a car.  You would ask the bank for a fixed amount of money, and then set up a number of months in which to pay it back.

Paying your bills on time, establishing a good checking and savings account, handling credit cards responsibly, and getting some sort of installment loan are all very important components for building a healthy credit score.