Establishing Credit

Getting Credit

Establishing credit is a huge part of growing up.  Getting that first credit card can be a heady experience.  But just having a credit card is not enough.  Using it properly is the best way to establish credit.

Two Rules for Credit Scores

There are two basic rules that represent the core of what it takes to have a good credit score.  First, only apply for the credit you need.  This is because a large part of every individual’s credit score is determined by the recency and amount of credit outstanding.  Trying to manipulate your credit score by opening up a large number of credit accounts or applying frequently hoping to get that first credit card have the potential to hurt your credit score.

Pay Your Bills On Time

The second rule is as important as it is obvious–pay your bills on time, every time.  The credit score is created from a formula that attempts to predict how likely you are to repay any credit extended to you.  If you show that you do not pay your bills on time, you are creating a history that demonstrates poor credit habits.  This represents 35% of your credit score and, especially for a person with a limited credit history, can lower your credit score for a long time in the future.

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