There are many of us (myself included) who at one point or another have thought that the road to good credit was running out and obtaining as many credit cards as possible. Not so, says a post on TheStreet.com. In fact, such a so-called ‘credit building’ strategy can actually do more harm than good if not handled properly. As the post points out

Flirting with credit card debt can be dangerous. Rates and rules are often changed at lenders. Congress has recently taken renewed interest in credit card company abuses. And, for many, the temptation to overspend has left people awash in debt.

So how, then, does one build good credit? Well, the truth is that good credit is simply a measure of one’s ability to handle the responsibility of paying back a borrowed sum in the manner agreed. As such, loans, too, are ‘credit building’ tools and many times come with fewer potentials for credit traps than do credit cards, especially in today’s economic climate. Now, of course this statement does NOT include predatory lending (i.e. payday loans, Cash Call, etc.) but rather student loans or collateralized bank loans, etc.

This post makes me think that while this so-called recession we are in is difficult on many levels, the flip side of it is that we are collectively gaining more and more awareness about the energy of money, how best to use it, how best to earn it and most importantly, how best to save it. It is often a tempting convenience to want to make credit cards our primary tool for establishing a good credit history, but there are alternatives as this post illustrates or, in other words,

The path to creditworthiness need not be lined with plastic. But all the same rules of financial responsibility apply: Pay on time, don’t overextend yourself, don’t let bills go into collection and be sure not to get a judgment on your report. And be conservative. The mark of a good credit risk, says Fair Isaac’s Watts, is someone who “is very resistant to the temptations that most of the rest of us succumb to on occasion.”

I encourage you to read the full post on TheStreet.com for more detailed information.

Tags | bank loans, credit card debt, Credit Cards, credit history, credit risk, creditworthiness, fair isaac, financial responsibility, Payday Loans, student loans