Your credit score is a measure of your credit-worthiness: in short, a measure of how much lenders can trust you to pay back their money. Building a good credit score requires discipline and vigilance. Discipline because you have to stick to certain financial practices until they become the norm for you and vigilance because you have to constantly be aware of the state of your credit by checking your credit reports periodically and disputing errors whenever you find them.
Pay Your Bills on Time
The single most important factor to building your credit score is your history of payments. To keep your score improving you need to pay your bills consistently on time. Late or skipped payments bring down your score. Many banks and even credit card companies offer automatic electronic payment facilities that you can use to ensure that you never send in a late payment.
Reduce the Amount of Debt You Carry
One way to continue building your credit is by paying down your loans. Carrying a high balance (over 30 percent of your overall credit limit) on your cards will negatively affect your credit score. To keep your credit score improving, keep your balances under 30 percent of the overall total and avoid maxing out, or reaching the limit, of any one card, since that also has a negative effect on your score, even if your other cards are unused.
Do Not Apply for New Credit Unless Necessary
Many people make the mistake of signing up for store cards or credit inquiries without realizing that those actions often have a negative impact on their credit scores. If you want to build your credit, be careful not to approve of unnecessary credit inquiries and do not apply for new credit unless it is necessary.
Use Your Credit Cards
A common misconception about credit is that once you carry no balance on your cards and don't use them then your score will continue to increase. Actually, this idea is false because after a period of inactivity banks are likely to close your card. A closed credit account can reduce your credit score because it will make your credit-utilization ratio (the amount of credit you use relative to your overall allowance) to increase.
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