Building Good Credit Scores

Building good credit scores can open the door to several opportunities in the finance world. Banks and lenders are more apt to approve your application, and once approved for credit, these lenders are more likely to assign a favorable interest rate to your account. Lower rates equate to cheaper loan payments.

Payment Tips

Getting behind on payments with credit card companies, mortgage and auto loan lenders can play a key role in destroying your credit rating and can result in credit rejections. Building a good credit score is indicative of a steady payment history and timely bill payments. Late or skipped payments can reduce your credit score, and once you've suffered the damage, it can take time to rebuild a lower score. Paying bills early helps avoid late arrivals, and using online payments systems can also help to ensure that lenders' payments are paid by the due date.

Options to Reduce Balances

Getting rid of debt on credit cards and paying off loans is another key way you can build a better credit score. Debt makes up 30 percent of your FICO credit score and improving a low or average credit rating requires repayment of debt. Keeping balances low can help fix a bad rating; limiting the amount of loans also aids in a good credit score. MSN Money recommends carrying a balance of no more than 10 to 30 percent of the card's credit limit.

Authorized User

Whether you're establishing first-time credit or rebuilding after a bankruptcy, becoming an authorized user on someone's credit card can help build a good credit score, says Bankrate.com. There are tips to ensure that this method works. For starters, choose someone with a history of good credit or someone who uses credit responsibly. After adding your name to this person's credit card, the credit account will show on your credit report. The way the person manages this account will affect your credit score. In other words, if they make timely bills payments and keep the balance low, your credit score will improve; but if they miss a payment, your credit score will drop.

Avoiding Delinquencis and Collections

Letting payment problems linger can result in a bad credit rating. Speak with your creditors and lenders if you experience financial hardship. Missing a payment and ignoring phone calls doesn't help the situation. Communication is key to salvaging your credit score and receiving assistance if you can't make a payment. Collection accounts and judgments stay on credit reports for up to seven years. Avoid these negative notations and work with creditors to adjust your due dates and payments.