Build Your Credit
Paying cash for products and services seems to be a practice that occurred in a different era. Today, credit is a way of life, and plastic has evolved into the currency of choice. Your credit can determine what kind of car you drive, what neighborhood you live in, and in some cases, whether or not you get the job you want.
With so much riding on your ability to manage debt and pay bills on time, it's important to learn as much as possible about how to establish and maintain good credit.
How to establish credit
There are several ways to establish your credit. Here are some approaches that should help get you started:
- Put your apartment and utilities in your own name.
- Apply for credit with a local business, such as a department store or a local bank or credit union.
- Apply for credit with an oil company as they typically have lower criteria for giving credit.
- Take out a small loan from a local bank or credit union. Even if you don't need the money, this is a good way to establish your credit.
- Apply for a secured credit card from your local bank. Your credit limit is equal to amount you deposit into an account. If you deposit $500, then your credit limit is $500.
- Make sure all of your creditors or lenders report credit history information to one of the credit bureaus so you can build your credit history.
How to maintain a good credit rating
Maintaining a good credit rating isn't difficult but it is important and should be taken seriously, since it can affect your ability to achieve other financial goals. Accurate credit information will follow you for seven years so focus on making it positive.
- Pay your bills on time. This is the best way to keep a strong credit rating and be considered a good credit risk by your future lenders.
- Talk to your creditors. If you fall behind in your payments you should contact your creditor immediately. Most are willing to set up alternative payment options especially if you inform them right away of your situation.
- Review your credit report. It is best to review your report annually-that way you can catch and correct any errors or negative information right away. You can order a report combining information from all three major credit agencies: Experian, Equifax and Trans Union Corporation.