Easy steps that can create good credit history.
Everyone’s familiar with this cyclical conundrum: You apply for a job and are told you need to have experience to be qualified for it. But the only way to get experience is for someone to hire you. How can you get experience if no one will give you experience? There’s a parallel situation when it comes to establishing credit. You’ll discover you can’t obtain credit without good credit history, but you can’t create good credit history without someone giving you some credit. This conundrum may seem impossible to escape, but there are some ways you can get your credit history started. This article on credit will give you a few ideas.
To start with, you need to be capable of showing potential credit-lenders that you’re a responsible and reliable adult. Ideally, you should be employed at the same job for more than a few years, to get the ball rolling. Next, you should open a savings account as well as a checking account, if you haven’t already done so. This shows that you have means of paying your bills and that you’re dedicated to saving money for future needs.
You also need to establish a positive history of getting your bills paid on time. Get your utilities marked in your name: water, gas, phone, electric, and so forth. Now, some utility companies check your credit before letting you do this, which might be a problem if you don’t have credit yet. But most likely, they’ll just make you put down a deposit until you’ve proven yourself. Next, get a copy of your credit report and score from the credit bureaus. This is to find out if they’ve even created a file on you yet. If they have, carefully go over the credit report to make sure everything is factual and up-to-date. The credit bureaus have files on about 90 percent of Americans over the age of 18 -- and about 80 percent of those files have mistakes in them. It’s your responsibility to get errors corrected, so look at your credit report carefully and alert the credit bureaus immediately to any errors. Having accomplished these preliminary steps, establishing a little good credit history and double-checking your credit report and score, now it’s time to take positive action to speed up the process. You need to apply for credit. Here are some things you could do:
- Fill out and application for a credit card that is unsecured (a “regular” credit card).
- Apply for a secured credit card, which requires you to pre-pay some or all of your credit limit.
- Have a co-signer apply with you.
- Get a store card or a gas card (which are easier to qualify for).
Any of these will mean that a file on you will be established at the credit bureaus (if it’s not already), and that each month it will be added to. After that, you just need to follow basic rules for keeping your credit history clean:
- Always pay in a timely fashion. That lets lenders know that they can trust you to fulfill your obligations to them.
- Don’t carry lots of credit cards. Lenders know that people with lots and lots of credit cards tend to overspend, go over their limit, and have trouble repaying. Don’t send that message. Have no more than two credit card accounts at once.
- Don’t apply for credit cards randomly and haphazardly. Too many inquiries into your credit at the credit bureaus send a message that you are careless and reckless. Your current lenders get nervous, and potential lenders won’t like it. Apply only when you truly need it.
- Don’t max out your cards. If at all possible, keep your balance at less than 30 percent of your credit limit.
- Pay more than the minimum each month. If you only pay the minimum, it looks like you’re having trouble repaying the amount, and your credit card company might increase your interest rate because you’re now perceived as more of a risk. Pay as much as you can each month, and keep those balances low.
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