Establishing Your Credit

Don't have credit, or would like to improve your credit? Building good credit doesn't have to be difficult, but it does require time and patience. Follow these tips and you're on your way:

• Pay your bills on time.
  Credit scores emphasize your most recent payment record. Paying on time raises your credit score. If you've been late, get caught up and start paying on time!

• Pay at least the minimum amount required.
  You can always pay more – and it's a good idea if you can afford to. But you should never pay less than the minimum.

• Keep your credit card balances low.
  Don't "max out" your credit cards – that can lower your credit score. Pay off credit cards rather than transferring the balance to another card.

• Don't apply for too many loans or new accounts.
  Applying for a lot of credit in a short period of time may concern lenders that you may become overextended. Only apply for credit when you need it.

• Keep your debt-to-income ratio at 20%.
  Generally, you should not have debt that's more than 20% of your net monthly income.

• Establish credit if you don't have any.
  Open a free or low-cost checking or savings account and make regular deposits. Only write checks when you have money to pay for things. And apply for one or two credit cards, use them carefully, and pay them off each month.

• Get help if you are feeling overwhelmed.
  If you are having trouble paying your bills or don't understand what steps you should be taking to improve your credit, talk to a credit counselor. But, beware of counseling agencies that promise to fix your credit or charge high fees – many counseling agencies are free or charge a nominal fee.