Learn How to Establish Good Credit: Back to Basics

Our society relies heavily on credit to make major purchases. Credit can even be used for smaller purchases. Even phone companies check your credit when you want to start phone service. Plus, prospective employers sometimes check your credit as well. It’s never too soon to begin building your credit.

It can take several month or even a few years to establish a good credit score. It’s smart to establish an excellent credit history before you need it. Learn about credit and how you can use it effectively to build a high credit score.

What’s Important for a Great Credit Score?

There are three primary components of a credit score:

1. Your payment history. Do you pay your bills on time? Then you’re perfect. Late payments and collection actions seriously damage your credit.
   
2. The length of your credit history. If you’ve only had credit for a couple of months, your score will be lower than if you’ve been using credit for several years, assuming everything else is equal. That’s why it’s important to get started today.
3. Your utilization ratio. If your credit card limit is $2,000 and your balance is $1,000, your utilization ratio is 50%. Always keep your utilization below 35%. Any higher than this will result in a lower credit score.

By keeping these factors in mind, you’ll can figure out how to build a great credit score. Acquire credit, make your payments on time, and keep your credit card balances low. It’s also helpful to have a good mix of credit.