Building and Maintaining Credit

A good credit history makes it possible to get credit, especially for major purchases like a car or home, and it keeps the cost of all borrowing to a minimum.

For example, having to pay just one extra percentage point on an average home mortgage because of bad credit could cost $100,000 or more over the course of the loan. 

A bad credit score may also work against you in some unexpected ways. Around half of all employers use credit reports in the hiring process, so a report filled with missed payments or collections could make it more difficult to find a job. A bad credit history could also make it expensive or impossible to get some education loans, potentially making it difficult to complete a college degree or go to graduate school.

To build and maintain good credit, follow these tips:

• Use your bank account responsibly - bounced checks will lower your score. 
• If you have services in your name such as telephone, cable, gas or electric, make sure you pay your bills in full and on time. 
• Consider one or a maximum of two credit cards. Having numerous credit cards will not help your credit score and may increase your risk of financial problems. If you do have more than one or two cards, pay the extra cards off and destroy them. But there's no need to call and officially close the account. Closing the account could reduce your credit score since the score is tied to both the length of your credit history and to the amount of your total available credit that is used. 
• Always make payments for loans and credit accounts by the due date each month. Even being one day late may increase your interest rate and will certainly result in a late fee ($35 on average). If a payment is more than 30 days late, your credit report will be damaged for seven years. 
• If you have an emergency and cannot pay your bills, contact your creditors. Before you call, have a clear summary of why you can't pay and what you would like the creditor to do to help. For example, if you can't afford a $100 minimum payment, maybe you can afford a $40 minimum payment. You will also want to ask that your account continues to be considered "current" on your credit report. 
• Review your credit report annually for accuracy at AnnualCreditReport.com. Knowing what's on your credit report will give you a chance to dispute any information you feel is inaccurate.

If you are ever denied credit, the lender is required under the Fair Credit Reporting Act to provide you with a free copy of your credit report at your request.