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How can I build or improve my credit?
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 To build credit:

  • Try to obtain a major credit card: VISA, MasterCard or American Express.
  • If unable, open a "secured” card from a major bank. Make sure it reports to all three of the major credit bureaus and converts to an unsecured card within 12-18 months. Consider fees carefully when comparing your options.
  • A parent may be willing to add you as a cosigner on one of their credit cards or loans...  you get credit for their positive payment history (or dinged for their missed payments) without running the risk of damaging their credit should they co-sign for you and you miss payments.
  • Charge only items you would purchase anyway, such as gas or your cell phone.
  • Pay the bill off IN FULL each month.
  • As you demonstrate responsible use of the card, request that your limit be raised.

To maintain and improve your credit:

  • Pay your bills on time.
  • Pay down balances owed.
  • Dispute inaccurate information.
  • Ensure all positive information is reporting.
  • Do not close accounts—this reduces credit available and your credit utilization ratio.
  • Keep your oldest account open to preserve your Length of Credit History.
  • Resolve negative issues such as back taxes, collections and judgments.
  • Do not open a bunch of new accounts at once—this looks like you may go on a spending binge.
  • Resist opening store cards—they don't do much for your credit and often carry high rates of interest.


Caution: Do not let the tail wag the dog. We have sold credit hard in this country. Credit matters, but you have to consider the trade offs. Do not take on an installment loan when you can pay cash merely to improve your credit. Leaving old accounts open can result in paying annual fees on credit cards or leave you at risk for fraud. If you are unhappy with your original credit card and have access to credit elsewhere, don't be afraid to close the account.

When it comes to credit, time heals all wounds.  Click here to learn how long negative information remains on your credit report.


<NEXT:  Now that I have built it, how do I protect my credit?>

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