If you look around the Country, credit is something that almost all of us need. It doesn’t matter if you are trying to secure a car loan, trying for a new mortgage, renting an apartment and now sometimes even applying for a job will require some type of credit history. Since all of your credit decisions are in your credit history it will cover all of your prior uses for your credit. If you are younger you may not have any credit history at all. This can be almost as damaging as having bad credit because you are considered a credit risk because of lack of history. If this applies to you, we recommend carefully building your credit and also trying to avoid some of the pitfalls that you can fall into. By avoiding these mistakes you will be able to build a strong and secure credit history.
Even if you do not have any credit yet, you should think about trying to procure a copy of your credit report from all of the credit bureaus to check and make sure everything is correct and none of the information is inaccurate. This is an excellent way to ensure that you have not become a victim of identity theft. The top three credit bureaus that exist are Equifax, Experian, and Trans Union. They can be contacted online, by phone and by traditional snail mail.
One of the easiest and first steps you should take to start building a credit is open a checking or savings account in your name. You may or may not already have one. If you do you are one step ahead in the credit building journey. Even if you only have one type of account like checking, you may want open a savings account also because on paper it will make you look financially stable. Savings accounts can also be used as collateral for some secured loans.
If it all possible, put as many bills as you can in your name. Bills like telephone and utilities are perfect for this. As long as you pay all of your bills on time then this can help improve your credit score. If you are able, put the bills in your name only.
Another step in this process is to try and obtain a credit card. You are probably inundated with credit card offers in your mailbox. Try to look through the offers and see if you can find one with very low interest rates and a low or nonexistent annual fee. One trap that you must not fall into is to not get more than one credit card. It is way too simple to obtain more than one card and just start running up the balances to the maximum amount. It also will look negatively on you if you open a bunch of accounts in a short period of time.
Another choice is to try and get someone to co-sign with you. What it means to have a co-signer is if that person has good credit, their good credit will spread to you because they are going to be jointly responsible for the money that you borrow. This can really help your credit in a positive way if you can make all of your payments on time and can pay off the debt. Keep in mind that with a co-signer you have a responsibility to them to make your payments on time because any misstep will have an impact on their credit as well as theirs.
As long as you are able to plan ahead, it can be somewhat painless to start building your credit the right way. If you get a credit card remember to keep the balance as low as possible and always make your payments on time. This should be used as a tool to establish and build credit; it shouldn’t be used as an extra bank account to spend money with. If you fall into that trap you may be on the fast track to seeking financial help or financial assistance. As long as you are patient and follow these guidelines you credit will start to look better to future potential lenders.