Building your credit when first receiving a credit card can sometimes be as much of a challenge as to figure out how to actual go about building good credit. However, there are a few basic fundamentals that most are aware of that credit agencies focus on the most when determining what your credit score should be, as well as whether or not your credit history is positive or negative in their eyes. Here is some of the basic information you should know when first starting out.
One of the biggest factors that credit reporting agencies focus on is your history of paying your bills. This can include things such as your mortgage bills, car loans and other loan related bills which can greatly affect your score. On the other hand, there are some things such as medical bills that are added to your credit report and may affect it, however they are usually more lenient with bills as seemingly small as this.
Another thing they look at is your total outstanding debt. This is the current amount that they see is owed to them that you have not paid back yet. Not only that, but when using a credit card, you can also affect your credit report depending on how much of your limit has been used, being either positively or negatively.
The length of time you’ve been building credit is another main factor that affects your credit score, and whether or not it is seen in a positive or negative light. Typically, the longer your credit history is, the higher your score should be.
Another main factor on your credit report is the number of times you have been noted to apply for credit cards or loans. To them, the more applications you may have on your history, the more likely that you may be financially struggling or how much debt you may currently be suffering from.
So now that you understand the general factors about your credit score, here are a few specifics that can either positively or negatively affect your final score.
Along with checking the history of paying your bills, if they see that you are known to pay your bills on time as well as in full, then this can be a positive factor on your final credit score. On the other hand, if they see you miss your payments frequently or pay them later than they are due, they will determine that you are irresponsible and this will be affected on your credit report. Along with this, bankruptcies and foreclosures are also factors that can put you in a negative spotlight. So when using your credit card, it is wise to not to grow delinquent if you intend on gaining a high credit score based on this.
Another factor that could either positively or negatively affect your credit score is your employment background. If the credit report agency sees you as having a constant and steady rate of employment, this will help them determine whether or not you are capable of paying your bills off on time and thus be a positive factor. On the other hand, if they see that you have long periods of unemployment, they may determine that your score should be lowered since you probably won’t be capable of paying off any bills that would be due.
Finally, another factor that is usually focused on is how much of your credit card limit you are using. If you are using around 25% or less of your total limit, they may see this as a positive sign and raise your credit score considering they believe that you have no intention of taking advantage of the privilege of having a credit card and attempting to use it too often. On the other hand, if they see that you have used 80% of your credit card limit, they may think that you are using your card way too often and taking advantage of your privilege since you are dangerously close to maxing out your card, which would be considered a risk to them. This would ultimately make them lower your credit score in the process.
Besides these factors, there are a few other factors that can affect your credit score, but a lot of these factors are kept quiet between the credit reporting agencies themselves. Many of the bills you may pay, such as your rent, your cable, your phone, insurance, electricity and other utilities, or you cell phone bill are known to not be reported to the traditional credit bureaus. Even still, they are known to be reported on your credit report nonetheless. It just isn’t very clear how much they effect you, even if they were to become delinquent.
So overall, keeping these factors in mind when trying to figure out how to build your credit with your credit card would be a wise idea since these are the ones they focus on the most. Its best to just make sure you have self control when using your card, and to pay whatever bills accumulate on your card to keep your balance low so that credit agencies deem you a profitable client for them and ultimately provide you with a positive effect on your final credit score.