John E. Pytte June 9, 2015

Credit scorevIn an era when banks are becoming notoriously tight with credit, it's never been more important to have a solid credit score. Whether you're trying to buy a home or you're just looking to be financially sound, building your credit score is both important and cumbersome. It can be done, of course, but only if you dedicate yourself to going through the right processes. Building a credit score is not a magic trick. Rather, it's the result of sustained positive decisions by people who understand how the system works. The best credit score is within your reach if you'll follow these tips.

How to Establish Credit

Whether you're a young person who is just getting started in the financial world or you're someone who has gone through a bankruptcy, you'll need to know how to establish credit. When you're just starting out on this journey, you'll want to take on low-limit credit cards with low annual fees. The smart move is to use these cards for some fixed purpose. For instance, if you drive, you might get a low-limit card and put all gas expenses on the card. Then, you'll want to pay off the card at the end of each month so that you don't have to pay significant interest charges.

Another means of establishing credit is to co-sign a credit account with a person who has good credit. If you're young, you might do this with your parents. They can put your name on one of their credit card accounts so that you'll get credit for their on-time payments and length of credit history. For those with spouses who have good credit, signing on to one of their credit accounts might make sense. There's no magic pill when it comes to establishing credit. The trick is to take on accounts that won't charge you too much, and to make payments on time.

How to Build your Credit Score

Good bankruptcy attorneys will tell you that there's a method to the madness when it's time to get the best credit score. How to raise credit score advice generally centers around reducing your credit utilization percentage. This is one of the best ways for you to quickly improve your rating. One of the metrics used to compute your credit score is the percentage of your available credit that you actually use. With this in mind, paying off a credit card will reduce that utilization percentage, giving you an instantaneous boost to your credit rating. Some people will even suggest opening new credit accounts to improve your score. If you open new accounts and do not use the new credit, then your utilization percentages will be lower.

It is also true that making consistent on-time payments can improve your credit score. Beyond that, you will need to watch time take its toll. If you have something negative on your report, like a missed payment or a collection account, you will wait seven years for it to fall off. The longer it goes, the better your score will get. How to raise credit score? Make good choices over the long term.

How to Sustain a Solid Credit Score

If you want to sustain your score, then you'll need to be responsible financially. Be wary of applying for too many credit accounts. When you apply for too many accounts, you'll see your credit score drop. Beyond that, you'll want to pay off your credit accounts on time at the end of each month. Carrying a balance will not only cost you money, but also valuable credit score points. The best credit score goes to those people who are smart enough to pay their bills on-time and not go wild opening new accounts. Each time you open a new account, you are reducing the average age of your credit accounts. If you already have good credit, and are not looking to build it, then opening new accounts can be harmful.

Whether you have questions on how to establish credit or you're wondering how to raise credit score, you need to take the advice of professionals. If you're looking to go through bankruptcy, then getting the advice of a good bankruptcy attorney is critical. They can advise you not only on the legal steps to take, but also how those steps will impact your credit score.