Here, in anticipation of the holiday season, are some tips for establishing good credit, from Fool credit expert Dayana Yochim:
Even if you're a confirmed rebel, try to be as "normal" as possible in your consumer credit habits, especially if you expect to borrow for a house some day. With the holidays around the corner, you may be itching to reach for your credit card; instead, consider these six small ways to keep your credit record clean.
- Pay your bills on time, especially mortgage or rent payments. Apart from extreme circumstances such as bankruptcy or tax liens, nothing has as big of an impact on your credit history as late payments.
- Establish credit early. Having clean, active charge accounts established many years ago will boost your score. If you are averse on principle to credit, consider setting up automatic monthly payments for, say, utilities and phone on a credit card account, and then locking the card away where it's not a temptation.
- Don't max out available credit on credit card accounts. Lenders won't be impressed. Instead, they are much more likely to assume that you have trouble managing your finances. Beyond one or two credit cards, it starts to get complicated.
- Don't apply for too much credit in a short amount of time. Multiple requests for your credit history (not including your own requests to check your file) will reduce your score. If you are hunting around for good loan rates, assume that every time you give your Social Security number to a lender or credit card company, those entities will order a credit history. (Note that multiple requests within a short period will count as one request, so that mortgage-shoppers and the like will not be penalized.)
- Be neat and consistent when filling out credit applications. Doing so will ensure that all your good deeds get recorded in a single file, as opposed to multiple files or, worse, someone else's file. Watch out for inconsistencies in use of "Jr." and "Sr." If it gets ugly, remind Dad that he already has his house.
- Check your credit history for errors, especially if you will soon be requesting a time-dependent loan, such as a mortgage. (Did you know that you're entitled to a free credit report under the Fair and Accurate Credit Transactions Act?)