Starting with your first credit card, everything you do that involves credit becomes part of your credit history. Using credit responsibly is a must if you intend to build and maintain a good credit history. The best way to build good credit is to create the habit of charging only what you can afford. This habit lets future lenders and creditors know you’re a responsible borrower. You’ll find it easier to borrow money and get new credit when you show that you have the discipline to borrow only what you can afford to repay. Not only that, only charging what you can afford helps you avoid excessive debt. The same rules applies to loans. Regardless of what the lender says you qualify for, you should only borrow what you can pay back. Before you shop for a loan, review your budget to see what monthly payment you can afford. Make sure your loan payment doesn’t exceed the amount you’ve come up with. Your credit score also suffers when you run up big credit card balances and don’t pay them off. Keeping your balance at a small percentage relative to your credit limit is best for building good credit. Too many inquiries into your credit and too many new credit cards can negatively affect your credit score. Credit inquiries count for 10% of your credit score and opening new credit cards lowers your average credit age, a factor that’s also 10% of your credit score. Spend time learning to be responsible with credit, and apply for new credit cards sparingly. Prevent negative accounts from being added to your credit report to build a good credit score. A serious delinquency like a debt collection can be hard to overcome. Closing an old account won’t remove it from your credit report immediately, but after several years, the credit bureaus will eventually drop old, closed accounts from your credit report.
