Five Ways to Build a Healthy Credit History

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If you've ever watched TV's "The Biggest Loser," you know that it's easier to maintain a healthy weight now than try to lose weight and overcome possible health conditions later. The same is true of your credit history, which affects everything from your purchasing power to your ability to get a reasonable loan rate or land a job. Building a healthy credit history from the start – rather than trying to overcome mistakes later – can save you time, energy and money.

To get an idea of your credit history, potential lenders will examine your credit score. A high credit score can make it easier to get a credit card or loan, and may result in the lender setting a lower interest rate. To boost your credit score, remember these tips:

  1. Pay your bills on time. Consider using your bank or credit union's automatic online bill pay feature to schedule payments. Then you'll be assured bills are paid on time even if you are away from home.
  2. Pay down your debt. There are two schools of thought, and which works best for you will depend on your personal outlook. One is to pay off high-interest-rate debt first, making the largest payments you can and only minimal payments to lower-interest-rate debt. This helps save money on interest. The other strategy is to pay off small debts fully first, paying the minimum on larger, high-rate debts. This gives you a psychological boost more quickly. See The Debt Snowball Method.
  3. Reconsider closing accounts. You may be tempted to close an old credit card account because you no longer use the card. But the longer you demonstrate a responsible borrowing history, the better your score. It might be a better option to cut up the card and leave the account open but unused. Exception: Don't leave open an account you no longer use if there is an annual fee. You'll be charged the fee whether you use the account or not.
  4. Think twice about opening accounts. Applying for a lot of credit at once can harm your credit score. And every line of credit you apply for will stay on your record for at least seven years, even if the account is only open for a day or two.
  5. Fix errors. Review your official records from all three major credit reporting agencies (Equifax, Experian and TransUnion) and be sure any incorrect information is corrected. You can order a free credit report from each agency once a year at*
    Note: You can set a reminder to order your free annual credit report on your personalized checklist

Important: Although you can get a free credit report, you will have to pay if you'd like to see your credit score. Also, be wary of sites other than that promise free credit reports. Often, there are strings attached, such as the requirement to sign up for a paid subscription service in order to get the free score.

* Website provided for information only. No endorsement is implied.