5 Common Credit Mistakes: Not Having Enough Credit (part 4)
Continuing our list of the top 5 most common credit mistakes that anybody can make (and many people do), we come to matter that’s easily overlooked: not having enough credit. So many fall under the assumption that having little or no credit is ok. But if you’re truly interested in having a good credit rating, establishing a sufficient history is essential.
What’s the point in having credit, anyway?
Many people tend to believe that they’re better off without credit. They may, at some point, take out a loan or credit card when necessary, but building a strong credit profile is not in their agenda. While they may they may take this position with the best possible intentions—they’re often failing to realize how important it can be to have a good, quality credit rating.
It’s important to take into account how difficult it can be for one to qualify for a loan or service of any kind without a stable credit history. Add in how it’s becoming increasingly difficult to rent even an apartment or even find a decent job without the proper level of credit and you can see just how important it is to put more effort into building a quality credit profile.
Thankfully, it’s never too late to start building your credit.
Okay, I’m convinced. But how do I start building credit?
Building credit can be easy, and even kind of fun if you do it right. The optimum credit profile typically consists of:
• A good combination of credit types (credit cards, utility services and an auto/home loan)
• The proper number of credit cards with low balances (3-5 cards, balances under 20% of limit)
• History of prompt and sufficient payments (always pay balance in full, on time, each month)
• A long, healthy credit record (keep your credit accounts open for as long as possible)
Of course, if you’re just starting your credit profile, you’re not going to be able to achieve this kind of a credit profile over night—it’s going to take some time and some real focus to build it up. But you can get yourself off to a good start by applying for a credit card (with the lowest interest rates possible) and using it moderately just to establish a positive payment history. Keep the balance as low as possible.
You might then want to add a card later if it would make sense to do so. Continue to add credit lines as necessary—and as long as you can afford to do so—but only for the purpose of building a good history. Before long, you’ll have the rating you’ve been going for.
And if you already have bad credit, just remember that it’s never too late to resolve your problems and start fresh.
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