Top 5 Tips to Build a Credit Line

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As soon as you get that credit approval, your first urge is probably to go out and shop—possibly getting more than you can really afford. But maxing out your credit makes for higher monthly payments. Then before you know it, you’ll start falling behind and destroy your squeaky-clean credit record. By following these top tips, you’ll be on your way to building a strong line of credit and helping to boost your overall credit score.

5 Check Your Report

The majority of lenders—credit unions, banks and credit card companies – report your line of credit to the credit bureaus. Always ask up front before signing your life away though; don’t just assume everything is being reported. Check your credit report several times throughout the year, but keep in mind that it may take several months for your line of credit to show up on your report. By ensuring that your payments and balances are being reported accurately, you’ll be able to keep your interest rates as low as possible. Plus, good marks on your credit will help you out when you want to apply for another line of credit.

4 Pay Extra

Unless you have some kind of introductory special with a new credit card, odds are you’re paying interest. While making your minimum on-time payments surely helps boost your credit ranking, you’ll be paying out the nose in interest. Pay a little extra each month—even if it’s only $50. That doesn’t sound like much, but by the end of the year, those additional payments add up to $600—enough to make a decent dent in the interest you have to pay to your lender.

3 Be Honest

Life is full of ups and downs, and everyone struggles at times. Be honest with your lender and communicate if you’re going through a hard time. Losing a job, going through a divorce or a death of a family member can put you into financial hardship. Before you start getting demanding letters and countless phone calls, make the initiative to talk to your lender first. In some cases, you might be allowed to defer a payment for a month or so—without getting any negative credit marks—to help you get on your feet.

2 Don’t Abuse It

Just because you get a big line of credit—whether it’s for a car, a new house or a credit card—doesn’t mean you should abuse it. Qualifying for a credit line and actually being able to afford it are two different things. Sure a lender may approve you for a big loan, but you don’t have to take it all. Look at your income and take out only what you can afford to pay each month. If you’re getting a new credit card, use it for purchases you make regularly, like gas and groceries. Otherwise if you go on a spending spree, you’ll get a surprisingly big bill the following month that you may have a hard time paying.

1 Pay on Time

The most obvious way to build a line of credit is to pay on time. Meeting your scheduled due dates shows your lender that you can be trusted, and maybe later on down the line, it’ll be easier to refinance or get a bigger line of credit. Ideally you should pay a couple days early. If you know your bill is due on the first day of each month, don’t wait until that day to pay it—sometimes it takes several days to post to your account, resulting in a late payment.
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