The habits that help to build a good credit history

A good credit history suggests that an individual is creditworthy and more or less consistent as far as expenses and income are concerned. Banks which give out loans, credit card companies and even employers are looking at the credit history of the individual to ensure that they are indeed dealing with the right person. A bad credit history is seen as an indicator of risk, which is why card holders have to try as hard as possible to maintain a good credit history. Here are some simple habits, which one should follow religiously to build a good credit history over a period of time.

A credit history, which shows all bills paid before the due date for over a year or two, indicates that the individual has control over his/her expenses and doesn’t go overboard. It also indicates that the individual is a responsible citizen, who pays all debts on time and doesn’t live beyond his or her means. Basically, a card holder or customer who pays bills on time on a consistent basis is what the creditors desperately seek. Hence, credit card customers shouldn’t be laid-back, when it comes to paying the bills. Waiting for the last day to pay your bills, could result in the risk of missing the due date, because of unforeseen situations thus tarnishing months and sometimes years of hard work. You would also avoid the late fees of up to 25 dollars if you don’t miss the deadline.

Some credit card customers have a revolving debt in excess of 2000 dollars. Usually such customers make minimum payments that are required, but incur a lot of interest and various other types of charges. Moreover, credit score goes down if the individual’s credit utilization ratio is high. It is the ratio of outstanding balance to available credit limit. Therefore, it is a good habit to pay off the outstanding balance in full at all times. An outstanding balance after the due date is only an indicator that the individual is living beyond his or her means.

This will incur overdraft fees on top of the outstanding balance. Using the entire credit limit available will also have an adverse effect on the credit history.

Every time you close an account you are losing the history. So use as few credit cards as possible, but don’t close them once you start using them.

Jennifer Brown

Jennifer Brown, an external business consultant working with a Fortune 500 company, has years of experience to her credit. Despite having a busy schedule through the day, she takes time out to write articles dealing with credit cards, payday loans and other financial aspects. She has completed her Bachelor degree in Financial Services from Columbia University and has been actively involved in various activities for the betterment of society.