Building Your Credit History and Credit Score

Never before has establishing a good credit score been as important as it is today. It will affect a lot of important ambitions that you have in your life, including buying a home or a car, getting a good job, a nice apartment, availing of insurance at reasonable rates, and so much more. If you want to take the first steps to building a good credit score, knowing what to do and what to avoid makes the difference.

Apply for a secured credit card
Applying for a credit card and paying for your bills on time is also a good way to increase your credit score. However, if you can’t avail of one yet, try applying for a secured credit card instead. The difference is that a secured credit card would require you to make a deposit to the lender. Whatever deposit you make is usually your credit limit. However, make sure that the one you are applying for has a low or no annual fee, and that your record will be reported to the credit bureau.

Set up a savings account
This is probably the most basic step in creating a good credit that is why more often than not, it is overlooked. Lenders see having your own savings account as an indication of financial stability. Whereas you cannot apply for a credit card until you reach the legal age, most banks will allow you to set up your personal savings account only with a minimum deposit. Otherwise, you can also create a joint account with an adult.

Borrow someone else’s good record
Another way you can start building a good credit score is to make use of someone else’s good record history by applying as a supplementary or authorized user to his credit card or get someone to co-sign a loan for you. Doing so will give you access to loans that you might not get if you were on your own. If you are applying as an authorized user of a credit card, make sure that the primary card holder pays his credit cards regularly. Otherwise, you will also get his bad record. Also, for the loans that you co-signed with someone, once you default, both of your credit history will be tainted.

Know the importance of credit scores
Credit scores are the numerical measurement of your creditworthiness. Simply put, it tells the lenders whether you pay your bills on time, what your salary is, and whether you max out your credit card limit. Cultivate the habit of paying your bills on time by utilizing automatic payment reminders. Otherwise, failing to pay on time even just once will have a huge impact on your credit score.

Check your credit report
To know what different institutions and businesses are saying about your ability to pay, you have to request for your credit report from one of the three major credit bureaus namely, Equifax, Experian and Trans Union. You have to know your credit reports because this is where your credit score will be derived from. Lenders and employers alike will definitely take a look at your credit report. There will be instances when your records might be mixed with someone else’s, or someone might use your personal information to create bogus accounts. Therefore, it is better to check your credit report once in a while. And if you found yourself in such an unfortunate circumstance, you have to clean up the mess before you attempt to apply for new credit accounts.