Published July 31, 2012
You've likepercly known that credit scores are important since long before you got your first credit card. But when you're just starting out in the world of credit, learning how to create a strong credit score can be tricky.
Credit cards can offer the key to beginning your credit history on the right foot, but only if you use them smartly. The guidelines below can help you use your credit cards to begin establishing a great credit score from the start.
Using credit cards to boost your credit score
You must begin using credit to establish your credit score, which for many means applying for a credit card. Once you have that new card, these tips can help you craft good credit that will last a lifetime:
Most credit experts will tell you that the most important tip for a strong credit score is to always pay your bills on time. Even one late payment can cancel out the gains from several months of responsible habits.
Avoiding a pitfall of credit applications
It's important to note that one of the ways to increase your score can sometimes push it in the opposite direction. Sound complicated? It's actually pretty simple.
When you apply for new lines of credit, you're giving a lending agency permission to pull your credit report. Every report requested can ding your score slightly, and that effect compounds with each new credit application.
So how are you supposed to increase that all-important score if what you do to raise it could also bring it down? The answer is simple: Have patience.
The hit you'll take from new credit factors into your score less than the boost you get from responsible credit use. On top of that, you get an extra lift to your score from having a long credit history. As you continue to manage your credit responsibly, those occassional new credit applications will factor less and less into the overall equation.
What's more, a diverse credit portfolio also helps increase your score. If you're in a place where you can apply for a mortgage or auto loan in addition to your credit card, you may add even more positive factors to your lending history.
It comes down to your reputation
Patience is a key virtue when it comes to building a strong credit score. Your credit score is a measure of your reputation as a borrower, and it isn't going to change overnight.
So stay smart, watch your spending limits and pay all of your bills on time. By doing so, your credit could go from non-existent to outstanding in just a few short years.
The original article can be found at MoneyBlueBook.com:
Building a great credit score from scratch