If you want to whip your finances into shape, here’s a good goal: improving your credit score.
A lot of goal-setting efforts fail because they’re so extreme. Think of all the bonkers weight-loss and money-saving goals that never go anywhere.
This is different. No extreme measures are required. But there aren’t any shortcuts. Building good credit is a goal you need to commit to long term.
How to Build Good Credit in 10 Steps
Ready to finally prove your creditworthiness? Here’s how to build good credit in 10 steps.
1. Stay on Top of Your Credit Reports
About 1 in 5 credit reports contain inaccurate information. Make sure you access your reports for free at AnnualCreditReport.comrather than one of the many websites that make you put down your credit card number to sign up for a trial. File a dispute with the bureaus if you find anything you think is inaccurate or any accounts you don’t recognize.
Your credit reports won’t show you your credit score, but you can use a free credit-monitoring service to check your score. (No, checking your own credit doesn’t hurt your score.) Many banks and credit card companies also give you your credit scores for free.
If the bureaus agree to remove information from your credit reports, expect to wait about 30 days until your reports are updated.
2. Pay Your Bills. On Time. Every Single Month
Yeah, you knew we were going to say this: Paying your bills on time is the No. 1 thing you can do to build good credit. Your payment history determines 35% of your score, more than any other credit factor.
Set whatever bills you can to autopay for at least the minimums to avoid missing payments. You can always pay extra if you can afford it.
A strong payment history takes time to build. If you’ve made late payments, they’ll stay on your credit reports for seven years. The good news is they do the most damage to your score in the first two years. After that, the impact starts to fade.