How to Establish an Excellent Credit Rating

Having an excellent credit rating comes with a range of benefits. People with strong credit ratings have an easier time getting a loan, buying a car or getting a mortgage. Bad credit can haunt consumers for seven years or more, according to the Federal Trade Commission. Therefore, the financial decision you make today can impact your credit rating for years to come. Make smart choices to establish an excellent credit rating.

Instructions

1

Pay your bills on time. Creditors look at whether you pay your bills--and pay them on time. Stay on top of your bills and make sure each payment processes on or before the bill's due date. Create a spreadsheet or calendar that lists each bill's due date. You can even use an online calendar to send yourself email reminders to pay your bills.

2

Manage your credit cards. Keep track of your spending, and don't run your credit card up to your limit. The Federal Trade Commission recommends carefully reviewing your credit card statement every month to make sure that double charges or incorrect charges are not on the bill. Do not charge more on your credit card than you can afford to pay off that month. A growing credit card balance can negatively impact your credit rating.

3

Limit the number of credit cards you have. The Federal Reserve System reports that some creditors look at the number and types of credit card amounts you have. Having too many credit cards can hurt your credit rating. Instead, keep a balance of installment loans and credit cards, which can improve your score, according to the Federal Reserve.

4

Reduce your debt. Creditors consider the amount of outstanding debt you have when determining your credit rating. Although some debt, like school loans, are inevitable and even worthwhile, work to pay down your debt every month. Avoid "bad debt" like credit cards.

5

Keep your identity safe. Identity theft can harm your credit rating because thieves can create fraudulent accounts using your personal information. The Federal Trade Commission suggests using passwords to protect your accounts, leaving identifying information like Social Security cards at home and guarding personal information.

6

Check your credit rating every year. The three major credit reporting agencies, Equifax, Experian and TransUnion, must provide a free copy of your credit rating once a year. Check it to make sure all of the activities reported on it are correct.