How Can I Build Positive Credit?
Posted by Jesse Smith on February 11, 2010 under Finance | 
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Increasing your credit score will require that you build positive credit. By doing this, you will become eligible for low interest credit products.
It is a common misperception that if you charge massive amounts on your credit cards and then pay them off each month, you will be building positive credit. In addition to not being necessarily true, this, in actuality, can hurt your credit standing. The reason for this is that credit providers want to know how much credit you have available to you and, of that amount, how much credit you have used. So, let’s say that you have applied for credit and, during the approval process, your credit provider sits down to view your credit report. He finds that your credit report shows that almost all of the credit limit on your credit cards has been used, because you have not yet paid that month’s bills. This will give a skewed picture of your finances and make you look like a bad credit risk.
In addition, you may be giving the credit provider the impression that you have a tendency to spend beyond your means, which is not what you want to do if you want to be approved for additional credit. In light of this, you might want to reconsider the strategy of charging everything and then paying the credit cards off in full at the end of each month.
It is also best not to have large amounts of unused available credit. So, what is an acceptable amount of credit to use? Well, a good guideline would be to use somewhere between 10% and 20% of your available credit. Credit providers will take this to mean that you can refrain from running your credit cards up while, at the same time, making your payments on time and as agreed.
It is important to maintain at least one credit card. If you are worried about approval, there are credit card providers that offer credit cards to people who suffer from poor credit. You should be on the watch to maintain the 10% to 20% rule noted above. You should not incur large amounts of monthly interest if you follow this guideline. Also, you should make sure that any credit cards you have or that you subsequently obtain are reported to the three major credit reporting bureaus – Equifax, Experian, and TransUnion.
In order to build positive credit, never be late in making your monthly payments and always pay at least the minimum amount due. Your credit score should increase if you follow this strategy.
Small low-interest personal loans can also be used to build positive credit. Follow the same strategy of paying at least the minimum amount due each month and paying on time. In short, you can use any credit product to build positive credit as long as you use it responsibly and wisely.
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