How to Maintain Good Credit HistoryPosted on November 11, 2009

Establishing and maintaining good credit history requires keeping your commitment to repay your credit cards or loans as agreed. This means making your payments on time in the amounts required. Neglecting to do so will make it difficult and costly for you to borrow money in the future. Your credit history can affect essential areas in your life such as renting an apartment or buying a home, getting insurance and even getting a job.

Plan for emergencies!

It is critical to set up and emergency savings fund and contribute to it regularly. You never know when you may need the money for unexpected things that may come up. Having some extra money will ensure that you have money so that you can still honor your credit agreements in spite of any unforeseen challenges.

Unfortunately, creditors don’t care what your situation is. If you’re late on a payment, they’re going to report it as late, and that late payment will remain on your credit report for 7 years. It will also have an impact on your credit score for the first two years. That’s pretty harsh for just one 30 day late payment, but that’s how it works.

What if you don’t have credit?

If you have not yet established credit, or you do not use credit, it’s in your best interest to apply for one or two cards. It takes about 2 years to really establish a credit history with enough information in it for a lender to make a risk-based decision for large purchases. You do not have to keep a balance on your credit cards if you’re adverse to credit. Just charge a small amount every other month or so and pay off the balance. This will ensure the account remains open and active with the creditor, and updates will be transmitted to the credit bureaus accordingly, which will give you the credit history you need, along with a good credit score.

If you are trying to re-establish your credit, and you cannot qualify for a traditional credit card, then one option that is guaranteed for you is to obtain a “secured card”. With this type of card, you deposit typically $300 to $500 in an account with the creditor and that amount becomes your credit limit. Because you are using your own money, there is no risk to the creditor.