I know it’s only October, but the holidays are going to sneak up on us before we know it. Soon it will be time to put up decorations, plan dinner parties and buy gifts for loved ones. It’s easy to get excited about all the fun that comes with the holidays, but without proper planning it can be a burden financially. It’s a good idea to start saving now and making sure that your credit is in good standing before the holidays roll around.
Discover has a fountain of free online resources to help you become more more financially literate. One of the topics is credit history, which is basically a list of all the pieces of your financial life — every credit card account you’ve opened, loan you’ve taken out, or debt you’ve repaid.
If you don’t have credit (or much credit), the key to building good credit is to start small. One credit card or small loan can get the ball rolling.
Here are some helpful tips to help you establish good credit:
1. Pay off your charges in full at the end of the month. When you get a card, always pay off the balance in full when the statement arrives. Paying off your balance in full shows the card company that you’re fiscally responsible.
2. Pay on time. One of the most important steps in building and maintaining a solid credit history is to pay all of your bills on time each month. That way, you’re showing the lender or creditor that you’ve got enough cash flow to cover your expenses. If you pay late, it may damage your credit history, and lower your credit score.
3. Keep your total charges well within your credit limit. If you want to boost your credit history and credit score, you’ll want to keep your total monthly charges well within your credit limit. Why? In calculating your credit score, you’ll take a hit if your balance is above that limit because it signals to creditors that you may be having financial difficulties and thus are a riskier borrower. Discover provides FICO credit scores on all cardmember statements, which is pretty helpful to keep track of over time.
4. Regularly read your credit report. It may not be your favorite reading material, but negative information can damage your credit history and your credit score. Making sure your information is current and accurate will ensure that no clerical errors keep you from getting credit or best available terms on a loan.
5. Understand what debit cards can do for you. While they look like credit cards, debit cards actually function more like a checkbook or cash. They provide direct access to the cash in your bank account. So you can pay for items and services with a debit card instead of writing a check. What debit cards don’t do is help you build your credit history because you’re not using credit to buy these items.
6. Focus on what you want. Your credit history becomes critical when it’s time to make those big purchases, like a home or a car. At that point, a one percent difference in the interest rate on a loan will either cost you or save you thousands of dollars over the life of the loan.
The basic principle with credit is this: use credit wisely and spend within your means.
With the holidays right around the corner, I encourage you to take a look at your credit score and see what you can do to improve it. There are several sites that offer free credit reports, such as Credit Karma.
What are your tips to establishing good credit?
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