How to Build Great Credit

A credit score is the representation of how much of a risk you are to the credit industries based on your past history of credit-based purchases and payments. If you have strong credit, you are more likely to receive school and car loans, mortgages and credit cards. Building up a credit score can take several years and it may take longer if you have late payments and bills on your credit history.

Instructions

1

Sign up for a gas or retail company credit card. When you are just starting at trying to build your credit, it may be tough to get accepted for credit cards at all. Gas and retail company cards tend to be less restricted. Obtain these cards at your local gas station or at a store that you shop at frequently. The company should be a well-known chain gas or retail company as they are more likely to report your on-time payments to the credit bureau.

2

Purchase items using this new card and pay off the balance in full every month. After about six months, you should have the credit established to apply for a card from a reputable company such as Discover, MasterCard, Visa or American Express. Apply to one of these companies for a credit card. Do not apply to more than one as too many applications can affect your credit score. If you are not accepted, continue to pay off your monthly balance on your gas or retail card and try again in six months.

3

Purchase items with your new credit card and pay off the balances every month. Every few months, request that your card have a higher credit limit. This will increase your credit and it will reflect positively on your credit score. Do not use more than 30 percent of your credit card for purchases as the credit companies consider it high credit utilization.

4

Apply for a new credit card every six months to a year and repeat step three, paying off the balances each month. Once you have five cards, you can stop applying for additional cards. If you are rejected at any point, wait at least one year before applying for a new card.

5

Take out a loan from your local bank. The bank will typically only let you take out a loan if your credit score is high enough and if you have a large enough amount of savings in your account at that bank. Paying off the loan every month will improve your credit score and it will improve your relationship with the bank for future loan needs.

6

Buy or sign-up for your credit report using websites like Annual Credit Report or My FICO. Check the report for inaccuracies such as accounts that aren't yours, false late payments or negative information older than seven years. Use the contact information on the credit report to call and fix these errors. The problems may take several months to be removed from your report and it is good practice to check a new report every few months to make sure.