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How to Build & Maintain Good Credit 

Pay Your Bills on Time   You must never be late with a payment. Aside from the damage it does to your credit, it starts to become a habit. Once you're late, it seems to blow the whole thing, making it easier to rationalize it in the future..."gee, it's just one late payment." Using automatic payments and online bill-pay provided by your bank are good ways to keep you on track.

Don't Live Beyond Your Means   Calculate a budget and stick to it. Make paying the bills your main priority. It helps to have a goal, like "I want to buy a house in 2 years." Steer clear of impulse-buying, especially involving credit. Credit shouldn't be used as something to fall back on or as a source of extra money for spending especially while you are in the process of building your credit. It seems alien to many people, but in order to get credit, you must prove you really don't need it.

Build a Strong Payment History  Your objective is to show that you pay off large credit card balances in full each month. This shows a great deal of responsibility. You can build a strong payment history by charging everyday living expenses on your credit card,  then paying off the monthly credit card charge in full each month with your saved cash.

A good plan is to pay for most purchases with a low-interest credit card and set aside the cash every time. Pay off that card every month. Obviously, if you've got bad credit, your rates are going to be through the roof. Just remember, it won't be this way forever. You will be paying for your mistakes for some time. Don't find yourself chasing your tail, though. Don't make the mistake of charging everything then blowing the money instead of paying off your card. If you find yourself heading down that road, stop using the card immediately and review your budget. Remember how hard you struggled to fix your bad credit.

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Keep Only a Few Credit Cards   As your credit rating improves, you will soon receive pre-approved offers from credit card companies and lenders with attractive rates and programs. Don't give in to temptation! You should limit your credit to three to four cards only. More than that will hurt your score.

Keep Your Number of Inquiries Low   Don't apply for credit more than 2 or 3 times every 6 months. Too many inquiries will kill your score because the lender thinks you might be heading for financial trouble. You'll also find that when you apply for a mortgage the lender will demand an explanation for every inquiry made to your credit for a period of say 30 days prior to applying. Don't ever let anyone convince you inquiries don't matter! Usually, the ones professing this crap are trying to sell you something on credit. Funny how that works... However, I have heard some rumors about a new scoring model coming out that doesn't weigh the number of inquiries. I'll keep you posted. In the mean time, it's better to play it safe and keep you inquiries to a bare minimum.

Watch Your Credit Reports and Scores  Always keep a close eye on your reports and scores, not just while you are rebuilding your credit. Having a goal (like, "I wan't an 800 Fico by next year) is a great idea, and watching your score keeps you on track.

Close All Retail and Gas Cards    Since you maintain three to four major credit cards (e.g., VISA, MasterCard, Discover, or American Express), it isn't necessary to hold gasoline cards, retail store cards, and other specialized credit cards. There are several reasons: too many cards hurts your score, the interest rates these types of cards charge is always sky-high, and the biggest reason.... retail cards tempt you to indulge in things you don't really need and could trigger you to overspend. Just use your major cards.

Avoid Maxing-Out Your Credit Cards   Don't use your credit card up to your maximum credit line because this will drag your score way down. It's a good idea to keep your balances at or below 60 percent of the available credit line. Ideally, 25 % or less.

Don't Have Too Many Outstanding Loans   Excessive loan balances (especially loans that exceed your Debt-to-Income ratio) can effect your credit rating. Maintaining a good credit rating requires that you reduce your debts by consolidating balances, closing unused credit card accounts, and paying off outstanding loans. Just be careful when closing old accounts. It could cause your score to drop because the scoring model likes to see accounts with a long payment history, even if the history is negative!

If You Start to Get Into Trouble   Don't let things get completely out of control before doing something. You may want to contact a consumer debt/credit counseling service, or even consider debt consolidation if necessary.