With prudence and foresight, establishing a good credit score is quite doable and can only get better over time by adhering to key money-management principles. At the same time, building a financial cushion is an essential component. Doing so will allow the bills to continue being paid in the wake of unemployment or illness.
Pay Bills on Time
There is no substitute for diligence in paying all bills on time. Even household bills not associated with credit cards, such as phone and electric utilities, can have a negative impact if paid late. Consumers should be aware that paying credit cards even one day late can result in late-payment fees, but as long as they are paid within 30 days of the due date, they are reported to the three national credit bureaus as current.
Fix Incorrect Information
Credit reports can be rife with errors having little or nothing to do with a consumer's payment history. Payments could have been improperly credited, there may be a dispute as to the actual amount owed, or credits for returned merchandise or unused services could have been posted later than promised. Consumers should check their credit scores at least once per year and promptly request that errors be fixed. Credit bureaus are required by law to respond to all written requests within 30 days.
Maintain Low Usage-to-Availability Ratio
One of the most influential barometers for a good credit score involves how much credit is actually used compared to the total amount available. Lenders ideally like to see that consumers have ample available credit but do not need to use it. This implies that they are not pressed for cash and have the means to repay any new credit obtained. Even if credit is not needed, a good way to build a higher credit score involves borrowing a small amount from several credit cards while repaying over time. This demonstrates responsible financial-management habits.
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