Smart Way to Get a Credit History

When you apply for a mortgage or car loan, lenders look at one number first: your credit score. This number, which springs from the credit reports kept on you by the three national credit bureaus, Equifax, Experian and TransUnion, is a snapshot of your credit history, the way you've paid your bills and managed your money. But what if you don't have much of a credit history yet? The good news is that you can build one, and you have the opportunity to do it the smart way.

Paying Bills on Time

Certain actions will have a negative impact on your credit score. One of the worst things you can do is not pay your bills on time.

If you're trying to build a credit history, your best strategy is to to begin using credit wisely. Pay for items with your credit card, but make sure to pay your bill on time, every month. Once you do this for a long enough period of time, you'll build up a history as someone who manages money well. This will result in a positive credit history and high credit scores.

Lenders also like to work with borrowers who don't use too much of their available credit. Don't ever reach the maximum on any of your credit cards. It's best to never use more than 30 percent of your credit limits.

Bank Accounts

You can start to build a financial history by opening a savings and checking account at a bank. By maintaining these accounts, without bouncing checks or draining them of cash, you show lenders that you are stable financially. This helps your credit score.

Many banks will let people younger than 18 open savings and checking accounts. Because you can't apply for a credit card until you are 18, bank accounts are one way for even the youngest of consumers to begin building a credit history.

Use Credit, Don't Overuse It

You won't get a credit score until you've had access to credit for at least six months. You have to use at least one of your sources of credit during this time.

If you use your credit cards regularly, you'll guarantee that your credit reports are updated on a regular basis. This is important if you're just starting to build a credit history.

Just be careful not to overuse your credit. If you run up a high amount of debt not only will you hurt your credit score, you'll get yourself into serious financial trouble. Try not to carry a balance on your credit cards from month to month; you don't have to pay interest on a credit card to build a credit history.