Tips for building and maintaining a good credit score

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Ask a Lender
June 5, 2017 | Updated September 22, 2017


Key Points

Building and maintaining credit

  • Building and maintaining credit takes time and discipline.
  • You may need a trusted partner to help get credit initially.
  • Maintaining good credit involves several caveats.
  • Zero balances may not be ideal.

Going through life with zero debt may sound commendable, but in the grand scheme of adulthood, it can be a huge limitation.

Zero debt means you have zero credit. And that limits your ability to find a place to live, get utilities, buy a car or even get a job.

Building — and maintaining — good credit takes time and discipline. This lifelong effort starts with a few steps. There also are important caveats to maintaining “good” credit.

Building credit

Here are some credit-building steps to take, and descriptions for how to go about things. 

Get a secured credit card

You’ll need a few hundred dollars of ready cash. Apply for a secured card at your financial institution. When approved, that money becomes collateral and is your credit limit.

  • How it works: You put up $500, for example. It goes into an account you can’t access. You have a $500 credit limit. You buy things on your card, pay the bill on time and build some credit. After a few months of responsible use and good payments, you can apply to upgrade to a regular credit card account. The $500 will then be released back to you.
Get a credit-builder loan

Often provided through your local credit union or a community bank, credit-building loans or secured personal loans are generally for a few hundred dollars. When approved, the borrowed money becomes the collateral for the loan.

  • How it works: You apply, and if accepted, the borrowed money is placed in a savings account. You make payments over time, the length depends on the loan agreement. Once you’ve repaid the loan with interest, you gain access to the money held in the account.
Partner up

Mutual trust and responsibility are important when you have a cosigner. Here, you partner up with someone on a loan or a credit card.

If approved, you and the cosigner are both responsible for payment and can both benefit on the credit score. You can become an authorized user on an established credit card or open a joint account with someone you trust.

  • How it works: To become an authorized user on an established credit card account, the account holder adds you to the list of users. You may make purchases with the card. The credit history shows up on your report. The primary account holder is responsible for paying the bill, but that responsibility falls to you if the primary doesn’t pay.
  • How it works: With a joint account, you and a trusted ally apply for a card or loan. You are both equally responsible for payment and both benefit from the credit history.

Maintaining good credit

You must know that getting a lifetime of good credit scores isn’t as easy as getting onto mom’s or dad’s credit card account and riding the wave of good credit karma. Mom or dad can help get you off the ground, but credit health self-maintenance is part of adulthood. Here’s how to do it well:

Pay your bills

Do it on time, every time. No excuses. Is your paycheck deposited directly into your bank account? Consider setting up automatic payment on your bills so the money comes right out of your account just after payday. At the very least, set up reminders to pay your bills. Credit bureaus see the steady, regular payments and reward you with higher numbers.

Watch the balances

“Balance” is the operative word here. Owing too much hurts your score (you may not be able to pay the bills), but owing nothing doesn’t necessarily show that you are responsibly paying. Credit bureaus look at your available credit limits vs. what you owe as part of your credit score. If you pay the full balance on your card just before the credit card company reports to the credit bureaus, it’ll report as if you had no charges and so, made no payments. You may have to wade through the fine print to see when the reporting happens and adjust your payments from there.

Zero is (maybe/maybe not) a hero

See above for zero credit card balances, but what about other debt? Credit bureaus also consider your credit mix. This includes credit cards, retail cards, loans and other regular payments that are reported, such as rent or utilities. (The latter two items aren’t always reported. Check with the credit agency). It’s a good idea to have more than one type of credit payment.

But not too many

Bureaus look at the history, meaning the length of time you’ve had a particular type of credit. Open several accounts in a short time, and it lowers your score. This also is true if you have several cards you never use. (The companies eventually stop reporting on them, and you lose the history). There’s no magic number. It depends on your overall credit.

Closing an account doesn’t wipe the history clean

Closing an account that you don’t use or missed a few payments on doesn’t mean you also wipe out that credit. That can take years.

Check your report regularly

You may get a free copy of your report from each of the three national credit bureaus once a year. You have the right to access your credit report and dispute any errors. Watch for “imposter” sites. See the Federal Trade Commission for guidance.

Building and maintaining good credit takes time and discipline. That said, it doesn’t take much to hurt a good score. The effort to build a good credit score pays off, however, with results that help you get favorable interest rates, better terms and financial flexibility.

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