Everything you need to know about how to have good credit in the US
Credit scores are one of the indispensable financial tools used in the USA. It is a number that helps lenders decide how likely you are to pay them if they grant you a loan or credit card. If the number is high, it indicates that you are responsible for your finances and that you will pay on time. But if it is low, it shows that you are a high-risk borrower and that you may not make the best financial decisions.
Having a good credit rating is very important in the US.
What is considered a good credit score?
The numbers can vary a bit, depending on which credit reporting agency you check. Here are examples of good and bad credit scores:
- 300–629: POOR CREDIT
- 630–689: FAIR CREDIT
- 690–719: GOOD CREDIT
- 720–850: EXCELLENT CREDIT
How long does it take to create a credit score?
You can do it very fast. The first step is to get your first loan or credit card. But a lot depends on the company that is in charge of calculating your score; some take as little as a month and others can take three to six months. However, a new credit score is based on a very small part of your financial history, so this can vary. For example, you can get a good score quickly, but if you don’t pay your credit card on time or are late in paying your cell phone bill, your cell phone bill will go down.
To have a good credit score, you need to have a history that shows that you have paid your bills on time and have been responsible for your finances. This could take up to three years to accomplish, and it could take up to five years to get an excellent credit score.
How can I have good credit?
Your credit history will begin to establish as you pay off your debts on time. That is why you must know when you must pay your bills each month so that you do not defer them or fall behind in payments. This includes your rent, cell phone, and credit card bills, student loans, and any other debt you may have. Here are more ways you can get a good credit score and make sure it keeps improving:
- Only spend what you can afford. Having a credit card does not mean that you can go shopping. Get into the habit of spending only what you can afford each month. This habit lets lenders and creditors know that you are a responsible borrower.
- Only use a small part of the credit that you have available. Your credit score will suffer if you accumulate too much balance on your credit card and do not pay it. Keeping your balance below 30% of the credit limit will help you establish good credit.
- Get started with just a credit card. Don’t get too many credit cards too soon! The more credit you have, the more temptation you will have to use it. Also, having too many can negatively affect your credit score.
- Make all your payments on time. As we already mentioned, you must know when to pay your bills. Clean them completely and on time each month.
- Pay the full balance on your credit card. This is very important. If you pay your balance every month, you show that you are responsible for your finances. Lenders and creditors like to see that quality, and it will reflect positively on your credit score.
- Keep your accounts open, don’t close them! The longer you have the credit, the better it will be for your score. Leave your oldest accounts open. Even if you don’t use them, you’d better pay any outstanding balance and keep them. This will help improve your score.
What are the advantages of having good credit?
Getting a good credit score will help you save money and make your financial life a lot easier. Here’s how you can benefit from having a good credit score:
- Lower interest rates on credit cards and loans.
- Greater chance of being approved for a credit card and a loan.
- You will be more easily approved when trying to rent a house or apartment.
- You will get better rates on car insurance.
Also, having good credit could help you avoid paying a security deposit.
- You could avoid paying a security deposit when you turn on utilities like water and electricity.