Good Credit Vs. Bad Credit
Build Good Credit
A good credit history helps you get better terms and conditions when you apply for credit cards and loans. You'll receive lower interest rates, which saves you money over time.
You can build and maintain good credit by:
- Keeping low balances and credit limits on cards. High outstanding debt and high credit limits can affect your credit score.
- Not opening new credit card accounts you don't need.
- Reestablishing your credit history if you've had problems before. Open new accounts, and use them responsibly. Make sure you pay them off on time.
- Using long-held accounts. If you have an established account showing a long history of on-time payments, keep it and use it to maintain a good score.
- Planning ahead. Accounts stay on your credit report for up to seven years.
Avoid Bad Credit
You can damage your credit by:
- Carrying high levels of debt.
- Making late payments.
- Missing payments.
- Paying only the minimum amount due on bills.
- Cell phones
- Credit cards
- Student loans
- Car loans
Some of the consequences of bad credit include:
- No credit. It is possible you won't be able to get any type of loan, even at high interest rates, if your credit is really poor.
- Loss of job opportunities. Many employers run a credit check before they hire employees.
- Lack of housing options. Many landlords won't let you sign a lease until they've checked your credit.
- Higher interest rates on credit cards and loans.
- Higher insurance premiums on car, health, rental and homeowners insurance.
See the difference interest rates make on a car loan.
(Information in this chart is estimated and intended for illustrative purposes only.)
| Good Credit | Average Credit | Bad Credit | |
|---|---|---|---|
| Amount Borrowed | $15,000 | $15,000 | $15,000 |
| Interest Rate | 7.00% | 12.00% | 18.00% |
| Monthly Payment | $297 | $334 | $381 |
| Total Amount Spent | $17,821 | $20,020 | $22,854 |
