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How Do I Establish Credit?

Author : Jennifer Quilter

When you're just getting started in the financial game it's important that you establish credit and in a positive manner. It's of course good to get started off on the right foot! The problem is that until you've established yourself and gotten some things on your credit report you'll have a hard time opening new accounts. This is because companies view you as a blank slate-you could make your payments on time, you could be late, they just don't know. And that blank slate is more worrisome than if you had bad credit, cause at least then they would know what to expect from you. There are ways for you to go about establishing your credit, however, so don't fret! It will just take a bit of effort.

The first thing to make sure you are clear on is that you should make sure you have a budget, especially before opening any new accounts. You don't want to sign up for some new monthly payment without first knowing that you can afford it. Make sure you know your monthly budget and exactly what you can afford for monthly payments on things before you get going. The worst case scenario is to establish your credit and establish that you make late payments or end up with collection agencies calling you.

So, your credit history is made up of two main types of payments. These are revolving, like credit cards, and installment, like loans. To have a varied history and a great score you want to have positive payment histories on both of these types of accounts. To begin with, you should look at secured credit cards. This is where you put a certain amount of money down, usually a minimum of a few hundred dollars, and this is used as collateral on the card. This also sets your credit limit. A good deal will report to all three of the major credit bureaus and you will have the opportunity to switch to an unsecured account after 12-18 months of positive payments. To build up a good history you want to use less than thirty percent of the limit on this card and pay it off in full each month.

For loans you have several options. You could get a CD secured loan, which is meant specifically for credit building. If you're in need of financing for some other reason however-like a car or school-that will also work for you. It's wise to get a card first however just to attempt to give yourself some credit to get yourself a better financing deal. Otherwise you will probably need to try and get a cosigner on this loan to get approval and any kind of decent interest rate.

With these paths set before you, you are well on your way to establishing your credit in a positive way.

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The more you understand the better off youll be. Check out the Credit Rating Scale so that you know what the numbers mean and more about credit scale factors to see what effects your score.

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Tags:   credit score range, credit scale, establish credit, credit score, build credit

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Submitted : 2011-07-25    Word Count : 515    Times Viewed: 467