The Importance of Building Credit and How to Get Started
Credit is one of life’s little enigmas. If you don’t have a credit history, you’re going to need it at some point. If you already have it, it may not be as good as it could be or you might not really be using it. Either way, credit can be difficult to obtain if you don’t have it or are not keeping up with it. If you are not flat out denied, odds are you will wind up paying a lot more than the guy with the five-star credit rating. Without credit history, a lender has no idea what kind of customer you are. With a limited or flawed credit history, you will seem like a risk to the company. If you want the best deals and offers, the ultimate rates and yeses rather than nos, you need to build up your credit and maintain a good credit score.
You will thank yourself later in life when you try to get a loan, mortgage that dream house, buy a new car or even go for some big career change. Here’s a few great ways to get started on building up your credit:
Pay Your Bills On Time
Keep all of your bills current. Not all of them will appear on your credit report, however, some will and the ones that don’t (such as renting from a private landlord) might still reward you with an impeccable credit reference later on.
Establish Bank Accounts
Get yourself a checking and savings account. Make regular deposits, maintain a balance and keep these accounts in good standing. As an added perk, grab yourself a high yield account and you can earn excellent interest on your money as well.
Secured Credit Cards
You make a deposit and have a credit limit typically equal to the amount of the deposit. You use it, pay it off and use it again. This builds your credit by showing consistency in your payments and use and your financial responsibility.
Any Reputable Credit Card
If you can obtain any type of credit card from a reputable issuer, get one, use it and keep it paid up. This will go on your credit report and will build your credit worthiness in the eyes of those who might be looking.
Store Cards, Store Financing, Rent-To-Own and Gas Cards
Sometimes, these types of credit cards are easier to obtain than a standard credit card. As long as the company reports your activity to a credit bureau and you keep the account current, you will be building good credit that will benefit you in the future.
Co-signers
As you start to build credit, you might want to use a cosigner for some transactions. You need to choose someone you trust that also trusts you and has their own good credit score and is financially responsible with all their own debts. Of course, don’t take this lightly. If you default, your cosigner is the one in hot water, since they vouched for you. Be responsible when using co-signers so as not to impact their credit rating, cost them money or ruin the relationship you have with them.
Always make sure that any option you choose for building credit comes from a place that will be reporting your financial dealings with them to a credit reporting agency. If they don’t do this, your actions are having no impact on your credit score, defeating your purpose. Building credit is a smart thing to do, but use it wisely. Never take having great credit for advantage. It could come back to bite you someday. One moment of irresponsibility is all it takes for your credit score to quickly decline.
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