How To Get Good Credit: Tips, Timeline & More
Anyone can go from no credit to good credit in a matter of months, or even weeks. But scores based on little information can fluctuate a lot, depending on your initial performance as a borrower. And building a consistently good credit score usually takes a few years of responsible money management. Above all else, that means paying your bills on time.
It might surprise you, but the average person already has good credit. Most people define good credit as scores from 660 to 719, and the average American comes in at 669. You can see if you’re part of the good-credit crowd by checking your latest credit score for free on WalletHub, the only site with free daily updates.Check Your Latest Credit Score – 100% Free
If your credit score is below 660, or just not as good as you’d like it to be, we’ve got some tips for how to get a rise out of your rating. You can check them out below, followed by an overview of what good credit gets you. And remember, lenders don’t all define good credit the same way. So you should always keep working to improve.
How To Get Good Credit – 4 Tips
Building credit is actually very simple. You just need to add positive information to your major credit reports. By doing so, you’ll build a track record of financial responsibility and diminish the impact of any mistakes you’ve made in the past. That’s the process from a high level. Below, we’ll detail the specific steps you should take.
Here are some of the best ways to get good credit:
Get a credit card. Using a credit card responsibly is the best way to add positive information to your credit reports and, thus, improve your credit score. And even if you have bad credit, you should be able to find a card with no annual fee. That’s important because you don’t actually have to make any purchases to build credit. Simply having an open account that’s in good standing will help you, even if it’s locked in a drawer.
The one thing you don’t want to do is apply for multiple credit cards at once, as this could damage your credit standing. So if you don’t get approved for your first choice, consider placing a refundable deposit on a secured credit card. Secured cards have the highest approval odds, and they’re just as good as unsecured cards in terms of credit building.
- Always pay on time. We cannot stress enough how important prompt payments are for your credit score. Payment history accounts for up to 40% of your credit score, after all. So make sure to check out WalletHub’s tips for never missing a due date. And work on repaying any outstanding balances you may owe. Having a lot of credit card debt is very expensive, for one thing. And it puts undue pressure on your finances, which could make it harder to pay your bills on time in the future.
- Utilize only a fraction of your available credit. Don’t be tempted to charge as much as you can. Using more than 30% of your credit line will hurt your score. The best option is to use 1% to 10% of your available credit. Spending less, repaying more of what you owe, and submitting multiple payments per month are all ways to reduce your credit utilization.
- Stay on top of your credit score. Regularly checking your credit score and report will help your track your progress toward good credit and make adjustments that will get you there faster. For example, you may notice signs of overspending or errors that you need to dispute.
Fortunately, you can check your latest credit score and report for free on WalletHub, the only site with free daily updates. You’ll also receive a personalized credit analysis, telling you exactly how to improve your score and how long it will take.Get Your Personalized Credit Analysis – 100% Free
What Does Good Credit Get You?
Good credit is well worth the effort. In addition to saving you a lot of money, it may also open some important doors in various aspects of life.
More specifically, getting good credit will get you:
- Better credit cards and loans. You need at least good credit to qualify for the market’s best rewards credit cards as well as most 0% credit cards. Loans often have higher approval standards than credit cards, too. But the higher your score is, the more you’ll be able to save with either a loan or line of credit. If you have fair credit, for example, you can expect to pay about five times more in interest on a new car loan than someone with excellent credit.
- Lower insurance premiums. People with no credit pay an average of 65% more for car insurance than people with excellent credit, according to WalletHub research.
- More rental and lease options. Renting an apartment or leasing a car counts as borrowing. After all, you don’t own the property in question. And you’ll have plenty of opportunity to damage it, which could impact its moneymaking potential for the owner. So if the person or company evaluating your credit sees consistent, on-time payments, they’ll consider you to be less of a risk.
- Increased chance of employment. Though employers can’t check your score, they can pull a version of your credit report, with your permission. A good report is like a character reference, and shows how skilled you are with managing money.
Getting your credit score into the good credit range is certainly an accomplishment, but it should by no means be your end goal. After you reach at least 660, you should set your eye on excellent credit, 720+. An excellent credit score will provide even more benefits than good credit, ranging from the lowest interest rates to the most attractive rewards.
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