We can all remember the uncomfortable feeling of sitting with a doctor, teacher, or potential employer as they looked at your file. What’s in that file? Seemingly everything you’ve ever done, all boiled down into one record. Unfortunately, even as grown-ups there are files kept on us, and one of the most important is the credit report and score. Fortunately, we’re able to see everything that’s in this all-powerful report, and to take measures to improve the information there. Why Does Credit Score Matter?
Before we look at how to establish good credit history, we should probably examine why credit is important to begin with. Basically, when you’re trying to buy a house or car, looking for good deals on insurance, or applying for a new job, people will be examining you to see if you’re trustworthy. A large part of that determination is based on your credit situation, which is summarized in your credit report and score. Considering how carefully lenders, bosses, and others pay attention to your credit report, it’s a good idea that you create good habits for yourself and keep your good credit history. That will lead potential lenders to see you as a low risk and a good customer to have, and you’ll get good credit card offers and enviable rates.
On the other hand, if you have poor habits with regard to your credit, your credit score will go down and lenders will avoid you. Making your payments after their due date, defaulting on a loan and having it go to a collection agency, bankruptcies, and other things can result in bad credit. Low credit scores frighten most lenders away, and those who do provide cards for people with bad credit do so at higher interest rates. So how do you make sure your credit report and score are sparkling and clean? Here are six easy steps that, if followed, will ensure your credit report is positive and enviable.
1. Get your credit report from the credit bureaus (Experian, TransUnion, and Equifax) and pore over it for errors, mistakes, out-dated information, and other problems. If there are any errors, inform the credit bureaus at once. If they don’t have a file on you yet, don’t worry; they soon will, after you go through the other steps. 2. Get a checking account and a savings account, if you don’t already have them. Use the accounts carefully; don’t become overdrawn or write bad checks. Taking out a little personal loan (if you can get it — you might need a co-signer) can also help establish good credit history, though of course for it to work, you must make your payments on time every month.
3. Get your utilities put in your name. That means gas, electric, phone, water, and so forth. Pay them on time every month. If you move to a new place, make sure you cancel the account, lest the person after you (or your old roommate) ruin your good credit history by misusing an account that’s still in your name. 4. If you’re going to college, get a student loan. Usually, your parents are put down as the actual borrowers, but the loan still gets counted in your column if you co-sign for it.
5. Apply for credit cards, but no more than two. You might only be able to get a secured card or co-signed card at first, or maybe just a gas card or department store card. (Those are usually easier to get.) After you get a card or two, use them responsibly, wisely, and carefully. Don’t borrow more than you can afford to pay back within a month. Make at least the minimum payment, but try to pay more. You’ll pay it off faster that way, plus you look more adult and responsible to the lenders.
6. Keep in mind that if you don’t behave carefully with all this, as you’re first starting out, you’ll be accomplishing the opposite of what you set out to do. You want to establish good credit history, so follow the rules and be wise!
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