How To Build A Good Credit Score
Your credit score in some ways is meant to be a snapshot of
your overall financial habits - especially your habits
surrounding debts and other financial responsibilities.
Developing some good financial habits can help your credit
score by putting you in a good financial position.
Good financial habits will ensure that you don’t get into
too much debt and that you are able to meet your financial
duties easily. There are a few financial habits that are
Tip #41: Learn to budget
One of the biggest reasons that people develop poor credit
is overspending. In many cases, this overspending is
caused by a lack of budget. A budget can tell you how
much you should be spending on each item in your life.
This allows your financial life to stay nicely
Contrary to popular belief, a budget does not have to be
constricting or boring or complicated. Simply note how
much you earn each month, and on a piece of paper, write down
how much you really need to spend on savings, rent, utilities,
food, personal care, transportation, spending money,
entertainment, hobbies, education, and other items. Make
sure that you account for every expense.
Then, simply commit yourself to spending that particular
amount on each item on your list. Of course, some
expenses on your list will change each month - you may spend
more on heating bills in the winter than in the summer, for
example - but estimating can help ensure that you can meet all
your financial responsibilities.
Tip #42: Live within your means
Many people believe that if they only had more money, they
would not have to worry about credit. In fact, this is
not true. Many people who have money - or at least have
all the trappings of money, including cars and nice homes - in
fact have terrible credit.
The secret of this is that it is not your income that
decides whether you are a good credit risk or a bad one but
rather how you handle money. You could be earning $7 per
hour and still paying your bills and meeting your financial
responsibilities - in which case you will have terrific
You could also be earning $300 000 a year and be in terrible
debt and financial shape due to unpaid bills and excessive
debt. The best way to ensure that you have a good credit
rating - no matter what your income - is to spend less than you
earn. That means living below your means. If you
have a very small income, you may need to live with roommates
in order to keep costs down. If you have a medium-sized
income, that may mean saving more and entertaining
You may be interested to note that your income is not a
factor in determining your credit score. Although your
past and current employers are listed on your credit report -
and although lenders may be able to guess your financial status
from your loan amounts - your income does not count.
This means that if you won the lottery today or suddenly
inherited a large sum, your credit score would not
increase. With your credit rating, what matters is how
you manage your money, not how much you make.