Establishing an excellent credit rating involves proving over time that you are responsible and are able to make good financial decisions.  Good credit cannot be established overnight, but earned and maintained over the course of your lifetime.

Establishing your initial credit account can be tough.  Lenders may be hesitant to lend money to individuals who have no credit history.   People who are having a tough time with that initial credit approval may have to work to get it.

Some lenders will consider bank account history, employment history, and rental and utility payment history. Opening a secured credit account, guaranteed by funds already in your checking or savings account, is a good way to get started.  Department store, jewelry, furniture, or gas credit cards are usually easier to get than a traditional credit card, but usually have a higher interest rate.  If all else fails, you can ask a family member to co-sign on a credit line with you.

Charge on your credit lines responsibly, and pay off the debt in a timely manner. Exercise discipline in spending, and create a financial spending plan.  Spending more than you can afford to repay can get you into deep financial straits.

You should only use credit cards when you absolutely need to, and maintain the balances at less than 35% of their credit limits. Higher balances and less available credit can negatively affect your credit rating.

Avoid applying for too much credit in a short period of time.  Lenders may view this type of activity as a license to shop, depending on the length of your credit history. Apply for only the credit you need to avoid becoming overwhelmed.

Keep credit lines open while there is a loan balance, otherwise the balance will be higher than the available credit reflects.  Close inactive accounts only after you determined you will not use them.  Closing inactive credit accounts does not necessarily equate to increasing your credit score.  You should consider the impact before canceling your accounts. When closing a credit line, ensure that you receive a written confirmation, and that your credit report reflects “account closed by borrower.”

Safeguard your credit cards, important documents and information to avoid becoming a victim of identity theft. Check and monitor your credit reports to ensure that the information is being reported correctly, and there is no unauthorized or fraudulent activity. Avoid lending credit cards to friends or others who are not legally responsible to repay the debt.

Take pride in your credit reputation. Poor credit is extremely hard to overcome, and financial irresponsibility will haunt you for a very long time.  Understanding the value of establishing and maintaining an excellent credit rating is important. Establishing an excellent credit history takes time and effort, but the result is well worth the hard work.

Having excellent credit comes with many benefits. Your good credit rating is the key to lower interest rates and fees, favorable loan terms, and many financial opportunities and freedoms you would not otherwise be entitled to.