Follow these rules to become creditworthy as quickly as possible.
Money Girl
293 MG 7 Essential Rules to Build Credit Fast
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Card has no cash access and expires in six months. Hi, friends. Thanks for downloading the Money Girl podcast. I'm Laura Adams, and you're listening to the Money Girl podcast. A money girl reader named Erica asks, "I'm a 25-year-old professional." Who's trying to save money and build credit so I can buy a home as quickly as possible. I have a credit card that I pay off in full every month. But what if I pay it off every week instead? Would that raise my credit score? How about paying down my student loans ahead of schedule? I desperately need your advice about how to build credit fast. Maintaining good credit is an important part of a healthy financial life. It allows you to qualify for new credit accounts, like car loans, credit cards, and mortgages at the lowest interest rates possible. But having great credit also helps you get competitive quotes on insurance. Get approved to rent a house or apartment, meet the requirements of a potential new employer, or qualify for a corporate credit card to pay for reimbursed job expenses. Building less for interest and insurance means you have more money left over to invest for the future, which is the key to building wealth. If you're having trouble improving your credit, or you're building credit for the first time like Erica, it's important to understand how credit really works and what influences scores the most. Use the following seven rules to build your credit as quickly as possible. Rule number one, credit scores come from data in your credit reports. Credit scores are calculated using information in your credit files that are maintained by nationwide credit reporting agencies like Equifax, Experian, and TransUnion. The vast majority of consumers have errors on their credit reports that go undetected for years because they've never taken the time to review them. If data in your credit reports is negative or incorrect, it's probably dragging down your credit scores without you knowing. However, it's easy to dispute errors and get your credit reports corrected. Start by visiting annualcreditreport.com to view or print each of your three free credit reports. In Colorado, our freedoms are everything. Gabe Evans would rip them away. Just like Lauren Bobert, he'd ban abortion without exceptions for rape or incest and overturn the right to marry for same-sex couples. Don't let him take our freedoms. Paid for by DCCC, www.dccc.org, not authorized by any candidate or candidate's committee. AT&T customers switching to T-Mobile has never been easier. We'll pay off your existing phone and give you a new one free, all on America's largest 5G network. Visit T-Mobile.com/carrierfreedom to switch today. Pay off up to $650 via virtual prepaid mastercard in 15 days. Free phone up to $830 via 24 monthly bill credits plus tax, qualifying port and trade and service on Go 5G next to credit required. Contact us before canceling entire account to continue bill credits to credit stop and balance and require finance agreements due. I love learning and anything that makes learning easier. If you're a parent and your child needs some homework help, then IXL is a right for your family. IXL is an online learning program for kids covering math, language arts, science and social studies. IXL has interactive practice problems for topics from pre-K to 12th grade and everything is organized by grade and subject. As kids practice, they get positive feedback, awards and explanations for wrong answers. IXL figures out what your kids need more help with and recommends more topics to practice. Your videos, lessons, sample problems and learning games too. One subscription to IXL gets you all subjects and all grade levels. Membership started just $9.95 a month. It's no wonder IXL is used in 95 of the top 100 school districts. I think the positive feedback that IXL gives is really crucial when it comes to learning. So make an impact on your child's learning, get IXL now and money girl listeners can get an exclusive 20% off IXL membership when they sign up today at IXL dot com slash money girl. Visit IXL dot com slash money girl to get the most effective learning program out there at the best price. Rule number two, bad credit marks can't be erased. The reason negative information on your credit history is so detrimental is because it stays there for a long time. Late payments remain for seven years and some bankruptcies remain for 10 years. So one strategy to building and maintaining great credit is to never have a negative item added to your credit file in the first place. Rule number three, building good credit takes time. Don't believe anyone who tells you that it's possible to instantly improve or fix poor credit. There's no way to immediately improve a credit score if it's based on accurate information. Credit scores can't be changed overnight because they're designed to reflect your credit behavior over time. The good news is that credit scores typically give more weight to recent activity and information. So if you do have negative information on your credit report like late payments and account in collections or a bankruptcy, time is on your side, those bad marks won't count against you as much as they age. Rule number four, paying bills on time influences credit the most. Erica asked if paying her credit card more frequently than once a month would help raise her credit. Though you don't earn additional credit points for paying bills early or making multiple payments, keeping a low balance on credit cards is beneficial. I'll talk more about that in a moment. Just remember that paying bills on time is the best way to build an impressive credit history and the opposite is true. Missing payments and having accounts in collection will hurt your credit scores more than any other factor. Rule number five, credit cards are credit building tools. Credit cards are one of the most convenient and safe ways to make purchases, plus they give you a powerful way to build a strong credit history. Since you decide how much to charge and pay off each month, a credit card reveals how responsible you are with credit and can really boost your scores. The best way to manage a credit card is to avoid interest charges altogether by paying the balance off in full each month. You never have to carry a balance or pay any interest to build great credit. Rule number six, keep balances low on credit cards. Though using credit cards can help you build credit, they can also damage it if you rack up too much debt. The amount of debt you have on revolving accounts, like credit cards and lines of credit, compared to your credit limits, is called your credit utilization ratio. A major factor in maintaining good credit is to keep this ratio low. Your outstanding balance on a credit card should never exceed 30 percent of your available credit limit, even if you pay it off by the statement due date. For example, if your credit limit on a card is $1,000, don't allow your balance to exceed $300 at any time during the billing cycle. To learn much more about what credit utilization is and how to manage it, be sure to listen to podcast number 270, call credit utilization what it means for your credit score. Rule number seven, installment loans build credit. Having an installment loan, like a car loan, student loan or mortgage, is great for your credit, because it demonstrates that you're a reliable borrower when you consistently pay on time. Erica asked whether she should pay off her student loans early, which is a common question. While lowering your total amount of debt can improve credit, in most cases it is not better to pay off student loans and mortgages ahead of schedule. However, I don't recommend keeping debt that you really don't need. If you have at least six months' worth of living expenses stashed away in an emergency fund and you're saving at least 15% of your income for retirement, paying off installment loans early may be a smart move for you. I've done several shows about whether it's better to get out of debt early or not. The most recent one to check out is podcast number 223, called Should You Pay Down Debt Early. Rule number eight, you must use credit to have a credit score. The key to building credit fast is to use credit accounts, but in moderation. Never abuse credit by using it to pay for a lifestyle that you can't afford because that destroys your financial future and your credit. Since credit scores are based on what's in your credit file, your goal should be to accumulate a long history of good credit behavior for different types of credit accounts, such as credit cards, lines of credit, and installment loans. When you understand how the credit scoring system works and use it strategically, you'll build excellent credit that will improve many aspects of your personal finances. If you want to watch a step-by-step video tutorial about how to check your credit score, correct errors, and build excellent credit, be sure to download my free credit score survival kit. Just visit smartmoves2growrich.com and click the button that says credit score survival kit. I created this free multimedia gift for you because I received so many questions about building credit. In the kit, you'll get an e-book, audio, and video to help you build and maintain excellent credit. For a transcript of this show, including links to everything I've mentioned, plus additional resources, visit the MoneyGirl page at quickanddirtytips.com. This is episode number 293, seven essential rules to build credit fast. I'm glad you're listening to CHING. That's all for now. Courtesy of MoneyGirl, your guide to a richer life. In Colorado, our freedoms are everything. Gabe Evans would rip them away. Just like Lauren Bobert, he'd ban abortion without exceptions for rape or incest, and overturn the right to marry for same-sex couples. Don't let him take our freedoms. Paid for by DCCC, www.dccc.org, not authorized by any candidate or candidate's committee. Walmart Plus, it's Walmart Plus Free Delivery, which saves members time plus money. Yep, plus an included Paramount Plus subscription to stream movies, shows, sports, and that can't miss documentary, plus Burger King savings. That's right, members get 25% off Burger King Digital Orders every day of the week. 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