• Val Golyk

Essential Steps to Building Your Credit History

If you ever wondered, why the interest for your new mortgage was higher than you anticipated or if you ever were declined in getting one at all – that would mean its time for a refresher course in understanding  the complicated and mysterious ways if managing your credit history.

Finding yourself under these circumstances, where you can’t get a loan to buy a car or the terms are forcing you to think twice if you really need a car right now, because, you know, it looks like it would be much cheaper to get to and from work every day with Uber Black than pay the interest rate! – is frustrating. in most cases would be really frustrating. It could mean you have a low credit score, or are making significant choices without truly understanding your financial path.

 So, what is a credit score and why does  it even exist? A credit score is basically your “creditability” profile. Before credit score whales (like Equifax, TransUnion, and Experian) were created, people relied on information they knew about each other. But that does not quite work in multi-million people cities, where consumers can actually hide from their creditors forever. That’s exactly when merchants and financial groups developed the lists of “trustworthy” customers, which basically mean lists of people who can actually get credit and would likely pay it back. Over time these groups evolved into credit reporting agencies or credit bureaus which are now widely used to assess customers creditability. They use your financial data about how you managed your debts in the past, how quickly and timely you paid your loans, including how many lines of credit you had and from which lenders you got your loans. This data is provided to them by many institutions you might be familiar with, like banks, utility companies, and credit companies. Employers, landlords, banks, car dealers and many others may use your credit score to evaluate loan, job or tenant candidates. So as you see, your credit score is based on your credit history, which details how many times the credit score information was requested, if there were any legal actions taken against you, such as property liens or lawsuits from money lenders, if you ever filed bankruptcy or did not pay your bills. That is the reason you really need to take care of your credit history while you use any kind of credit products to build a proper credit score. 

Here, we will provide you with some essential steps to help you to keep your credit score high enough for any money lender that might look into your credit history:

1. Use credit cards wisely. You know, that credit money is not free, you have to pay them back to the bank that issued your card. So don’t go on a shopping spree as soon as you get one. But remember to use it regularly, that will add points to your credit score as a credit user.Pay on time. If you have your payment scheduled – stick to the deadlines at all times. You don’t want to pay any additional fees to your bank either and you don’t want your score to drop because of a 1-minute overdue payment. This works not only for any credit lines you have but basically with anything, like phone bills, utilities, Internet access provider bills, and rent.

2. Use spending habits changing software. Existing tools like Maiven will drastically improve your spending habits, which will influence your credit score rating in a good way. The idea of changing your spending habits is really crucial because unless you can control your “buying itch” – all other methods might fail for you since you simply can run out of money.

3. Use loan tracking and management software. You always want to know when the next payment is upcoming as you want to know the size of the payment.Plan your credit spendings. You can always set a limit for credit card usage per month so you can cover that amount by the end of the month from your debit account. But this requires some planning skills and an ingrained habit of self-control so this advice would work much better if you use Maiven as well.

4. Use notifications or automatic payments. Auto payments and calendar reminders will help you pay on time every month. So would  Maiven if you enable in-app or email notifications on a daily/weekly/monthly basis.

5. Keep balances low on credit cards. Credit utilization ratio is another valuable score that affects your credit score. It is calculated by dividing your total debt by your total available credit. The lower this ratio is the higher credit score you get.

6. Do not close your credit accounts. As long as you don’t need to pay an upkeep fee it is a good idea to keep your old credit accounts open. This will improve your credit score as well, because it shows a longer history.

7. Do not apply for any new credit cards. If you don’t need them – it is better not to open any new credit lines for an obvious reason: you already have enough and are trying to stay away from any additional spendings and debts.

We believe that a good credit score with wise personal finance management will improve the quality of your life significantly. And by using these free pieces of advice you can achieve a substantial increase in your credit score and an ability to pay less for your car, house or a 100” 8K flat panel if you urgently need one. If we add changed spending habits, personal finance planning, savvy credit line management to the equation that would lead us to the situation when you will never need to question your credit score again.

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