You might have a general knowledge about how your credit score impacts your ability to qualify for a home or car loan, or be eligible for other types of debt. But you may not know exactly how to establish good credit, especially if you’re younger and don’t have as much experience with spending. Your credit rating is vital to your ability to buy a house and car, and obtain credit cards in your name; it can also impact your employment options and impact your lodging if you decide to rent. Here are some tips that can help you establish credit so you don’t get into trouble down the road.

How To Establish Credit

Understand how your credit rating is determined. Your FICO score is what most lenders will look at when you apply for any time of financing. The number is calculated from a number of factors:

  • Payment History (35%): The largest percentage of your credit score comes from how well you stick to payment deadlines and paying a bill amount in full every month.
  • Credit Utilization (30%): This term refers to your balances with each type of credit account you have. In general, keep your balances under 30% of the total allotted credit amount.
  • Length of Credit History (15%): The number of years you’ve been using credit does weigh into your credit score.
  • Types of Credit in Use (10%): Your mortgage, car payment, utility bills, credit cards and other accounts are important figures in determining your credit rating.
  • New Credit (10%): If you’ve applied for a new card or loan recently, this will qualify as new credit.

Check your credit report regularly. It’s essential to run your credit report once a year as you’re working to establish credit. Mistakes can be made by your creditors, but you cannot fix these errors unless you’re aware of them.

Pay all bills on time. As your Payment History makes up 35% of your credit score, making on time payments on all accounts is critical. This includes mortgage payments, car loans, credit cards, utilities, gas station cards, medical bills and any other accounts you pay on a monthly basis.

Make sure your credit card debt remains low. Of all the different types of loans, you should make sure that your credit card balance stays as low as possible. Create a budget and stick to it so that you’re very rarely using a credit card to make purchases.

Be patient. Establishing good credit takes time. If you’re paying bills on time and keeping credit card balances low, you’ll see your credit score rise over time. Keep in mind that a score in the 700-800 range is considered good for purposes of most loans.


San Diego Credit Card Lawyer

Despite learning about these tips on establishing credit, some people can still have problems with creditors – especially with credit card accounts and other unsecured debt.  The good news is that there are ways to get out from under oppressive debt and head to a brighter financial future, through such arrangements as settlement and consolidation. Contact a San Diego credit card lawyer for more information on your options and find the right route for you.

Daniel R. Gamez, an attorney focusing exclusively in debt settlement, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in La Jolla, CA. For more information, please contact Daniel Gamez at 858-217-5051, or visit Stay updated with the latest debt relief tips by following on Facebook and Twitter!