How to Build a Credit History

Beginning with your very first credit card, every credit transaction you make becomes a part of your credit history. To build a good history, you need to learn how to use your credit responsibly. This guide will tell you how to start building a credit history and it will teach you about the responsible use of credit.

1. Charge what you can afford to pay off, and nothing more. When you establish that habit, it lets prospective lenders know that you are responsible. You will find that you'll have an easier time getting credit and borrowing money when you show that you only borrow what you can afford. You'll also stay out of the debt trap.

2. Only use a small portion of your available credit. Coming close to or actually maxing your cards out is a very irresponsible use of credit. Most of us cannot afford to pay off a maxed out card, and lenders know that these borrowers will almost always run into difficulty with repayment. Using less than half of your available credit is a good idea; aim even lower, about thirty percent is ideal.

3. Start small, with a single credit card. A lot of novice credit cardholders amass a collection of plastic in the first few years that they are eligible for credit. This is a bad idea- the more credit you have access to, the more you will likely use. Learn about the responsible use of credit before you apply for more cards.

4. Pay your balances, on time and in full. If you are following the first rule and only charging what you can pay, this will not be an issue for you. Timely payments comprise a large portion of your credit score, and paying on time will boost your history.

5. Know the proper way to carry a balance. Having a balance is not detrimental as long as it is done correctly. Pay more than your minimum payment every month to pay your balance down faster, and avoid paying late. Keep your balance manageable, too. Handling balances in this way will keep them from damaging your credit.

Even if you do not yet have credit, you should begin by asking each of the three main credit bureaus for a copy of your credit report. Check them for inaccurate information, and for signs of identity theft. Each of the three bureaus (Experian, Equifax and TransUnion) can be contacted by phone, by mail, or online.

No matter who you are, you will need credit at some point in your life. Credit is essential for mortgage and apartment lease application, for getting a car loan, and sometimes even applying for a job. For any of these things, you will need a good credit history. By using these tips, you'll learn how to start building a credit history. Responsible use of credit and the avoidance of mistakes will help you establish a good name with lenders, and it will serve you well for many years to come.