The more you know about credit, the more power you have to handle credit responsibly. These tips can teach you how to establish good credit and manage your credit wisely.

Build A Positive Credit History

The best way to establish positive credit history is by paying your balance off every month. It’s a common myth that carrying a balance and making minimum payments will establish good credit.

This isn’t true.  You can prove your credit worthiness by paying the bill in full each month.

Spend Within Your Budget

This includes being able to make loan or credit card payments without jeopardizing your budget.  When you’re talking about credit card payments, this means being able to pay off the entire balance each month, or over three months at the most.

One easy way to start your credit history is to pay for only your gas or groceries each month on a credit card and then immediately put that money aside to pay the balance in full each month.

When looking to obtain credit, should you borrow the maximum that is granted to you?  Will that tap out your total monthly income?  Before you borrow for a big purchase, think about your total monthly obligations and make sure you stay below your income.  Be sure to include periodic payments such as insurance or taxes and upcoming payments that you may have such as student loans.  Unless you do this, there will be no room for emergency savings.

Establish Credit

With the changes in the credit card laws a few years ago, it is becoming harder to establish credit or get that first credit card.  Some alternatives to getting a credit card to establish credit are the following:

• Apply for a small loan through a credit union and have the loan payments auto deducted from your checking account.
• Apply for a joint credit card with a parent.
• Get a secured credit card.  Verify that the card that you choose reports to at least one of the credit bureaus.

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