You may want to add one more resolution to your list this year—-to establish and maintain good credit. Having good credit is essential to qualifying for a mortgage or financing the purchase of a car, and it often helps determine the rate you will receive on any type of loan. Practice smart saving and spending habits to help establish good credit that will serve as the foundation for a more secure financial future.
Note the following tips on how to establish and maintain a good credit history:
- If you are just beginning to establish your credit history, open a checking account and keep careful track of your balance.
- Open a savings account and contribute to it regularly.
- Develop and follow a budget. Make sure to account for both fixed and non-monthly expenses, such as insurance and taxes.
- Pay all your bills on time, including utilities and even gym fees and parking tickets.
- Use debit and credit cards for convenience and safety, but not to overspend. Monitor the activity on your account and review statements carefully. Be sure that you understand the terms and any fees that may apply.
- Avoid offers to open several different credit cards, and never use one credit card to make payments on another.
- Order a free copy of your credit report. Under federal law, you can get a free report from each of the three national credit reporting companies every 12 months at www.annualcreditreport.com or by calling (877) 322-8228. Read your report carefully and correct any errors.
- Build an emergency fund equal to at least six months of living expenses. If the unexpected happens, you will still be able to pay fixed expenses instead of falling behind.
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