If your credit is in rough shape, there are some steps you can take to improve your situation. But achieving good credit isn't enough. You're also going to want to make sure you develop positive credit habits that will help you maintain good credit.

Credit Score Basics

The first step toward building good credit is understanding how it works.

Your credit score is a number that provides a snapshot of your creditworthiness at a moment in time. Credit scores, most notably FICO scores, typically range from 300 to 850, with higher numbers representing better creditworthiness.

Credit scores are calculated using information found in your credit reports, which are compiled by the three national credit bureaus: TransUnion, Experian, and Equifax. Lenders report information concerning your accounts to these agencies, and they compile it all into reports.build good credit

However, because these agencies operate on their own and not all creditors report to all three, your reports may vary. Therefore, your credit scores may also differ (yes, you have more than one credit score).

Still, the factors that make up your credit score are generally the same. Here are the components that make up your FICO score, the most popular credit score in circulation and the one used by the majority of lenders:

  • Payment History: 35%
  • Credit Utilization/Amounts Owed: 30%
  • Length of Credit History: 15%
  • Credit Diversity: 10%
  • New Credit: 10%

Four Tips to Help You Build and Maintain Good Credit

Here are some simple steps you should take if you are trying to improve your credit.

  • Step 1: Look at Your Credit
    Get your credit reports and at least one of your scores to get a better understanding of your current status. You can order your reports from annualcreditreport.com, while there are several ways to obtain your credit rating. You should do this to look for errors or inaccurate information and identify problem areas. You can dispute inaccuracies and have them removed from your report.
  • Step 2: Never Miss a Payment
    You need to make every single payment for every single bill on time. Your payment history is what impacts your credit rating the most, making it the number one key to building good credit.
  • Step 3: Keep Credit Card Balances Low
    If you carry a balance on a credit card that is more than 30% of its available limit, it's likely hurting your credit. So, if your credit limit on a card is $1,000, keep the balance below $300. However, you also can't forget to use your cards. Keeping them idle won't help you build your credit, but using them responsibly (while keeping balances low) will.
  • Step 4: Be Patient
    Credit building is a task that doesn't provide much instant gratification. It takes time for your new, good credit habits to have an impact. Just be patient and keep working at it and, in time, your efforts will be rewarded.

The Bottom Line

Following these steps can help you build good credit habits that will make a difference in the long-run.

Another way you can boost your credit is with an auto loan. A car loan will add diversity to your credit portfolio and give you another account to make timely payments on. So, if you need a car, it makes for a great credit-building tool.

If you have less than perfect credit and need a car, Auto Credit Express wants to help you find financing. Our service connects car buyers with credit issues to local dealerships that may be able to help them out.

Get started right now by filing out our free and easy car loan request form.