How to establish good credit

How to establish good credit

Have you experienced bad credit in the past and looking for ways to improve your credit quickly so you will be able to obtain credit in the future? Take a look below at some helpful advice on how to establish good credit to get you back on track.

Stop applying for credit if you keep getting rejected.

The first thing to do is stop applying for credit if you keep getting rejected. Being rejected by multiple lenders could make your credit profile worse.

Try to understand why you are getting refused credit so you can look to obtain the credit you need with suitable lenders who could take your current circumstances into consideration.

Only borrow what you can afford

So our advice would be to start out small! Keep your credit card debt low. The golden rule would be to pay off your balance in full each month, but if have to carry a balance from month to month, don’t let your debt balance exceed 30% of your credit limit. By doing this it keeps everything manageable.

Establishing good credit takes time. Don’t run into trouble by opening too many accounts. Choose a credit card that carries a modest spending limit, offers a fixed interest rate, and charges no annual fees.

Paying off your balance each month shows that you’re capable of paying bills, something lenders want to see.

Make all your payments on time

Make 100% of your payments on time, not only with credit accounts but also with other accounts, such as utility bills. Bills that go unpaid may be sold to a collection agency, which will seriously damage your credit profile. Lenders are very unlikely to want to lend you money if you are not repaying what you already owe.

Let your accounts mature

The longer you’ve had credit, the better it is for your credit score. Leave your oldest accounts open since they help increase your credit age and build good credit. Unless one of your unused cards has an annual fee, you should keep them all open and active for the sake of your length of payment history and available credit to you.

But remember to avoid opening too many new accounts at once; new accounts lower your average account age, which makes up part of your credit score.

Avoid expensive credit repair companies

You may see adverts from firms that claim to repair your credit rating. Most of those simply negotiate with any companies that have sought County Court Judgments against you. Others claim they can do things that – legally – they can’t, and some may even encourage you to lie to the credit reference agencies. Don’t even consider using such firms as you may end up in more of a sticky situation than before you used them.

Take a look at our ‘Helpful Tools‘ page which features budget planner, savings calculator and cutback calculator. They could help you manage your finances.

For more information about obtaining finance if you have bad credit visit our ‘Bad Credit Car Finance Explained’ page which features information on guaranteed car finance, being self-employed and refused car finance.