Credit 101 : Establishing Good Credit (Page 2 of 2)
You can also apply for a secured credit card. These cards ask that you place a certain amount of money in your account for which you will receive a charge card. Then you can make purchases up to the amount of money that is in your account. Credit reporting agencies treat these cards just like regular credit cards and look to them as a responsible way for you to establish a good credit history.
You will have to have a checking account to establish credit. This lends to your credibility with lenders and shows that you are able to manage your money effectively.
When applying for a credit card of any type, be sure to ask if they report to any of the credit reporting agencies. As we’ve said before, they are not required to do so, and if they don’t, having one of these cards or loans won’t do you a lick of good even if you do make your payments on time.
You can also establish credit by making a purchase or applying for a loan with a co-signer. A co-signer is a person with good credit history who is basically telling the lending company that they will be responsible for making sure you make your payments on time. Often a co-signer is a relative such as a parent. This can be a risky proposition for them, so know that they are putting their own credit history on the line just to help you out, so don’t let them down.
When applying for a loan, such as a car loan, it can also be helpful if you have a large down payment to make thus lessening the amount of money you have to borrow. This shows the lending company that you have the ability to save and they are more likely to take a chance on you based on this factor alone.
So let’s do a quick review on how to establish a good credit history:
- Apply for a store or gas credit card and make a few charges
- Ask a loved one to co-sign on a loan
- Find a respected secured credit card company
- Open a checking account
- Don't apply for too many credit cards in too short of a time
- Check your credit report for any errors
- Go slowly
- Don't overspend
- Make sure your lender reports to at least one of the credit reporting agencies
- MAKE YOUR PAYMENTS ON TIME!!!!!!!
Of course, the last one is the most important in establishing credit. If you don’t make your payments on time, it won’t make a hill of beans worth of difference what you are trying to do. This is what makes your credit history worthwhile – making on time payments and showing you are responsible with your credit and your creditors.
So, what if you’ve already had credit, but you’ve made some mistakes over the years finding yourself with bad credit? Is all hope lost? The good news is – NO!
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