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How to build your credit

The Importance of Positive Credit

Your credit score is a vital part of your financial life. But good credit today extends well beyond just the financial aspects, even impacting your day-to-day personal and professional pursuits. Your credit score will play a large role in your ability to:

  • Get a Job ~ Most employers of professional, skilled and management employees utilize credit checks and background checks as a part of the hiring decision. If your credit is not good, you may not get the job that want.
  • Get a Promotion ~ Many employers will perform credit and background checks on existing employees prior to promotion. If your credit is not good, you may not get that promotion you have been waiting for or the extra income that usually comes with it.
  • Rent an Apartment or House ~ Many rental property owners and management companies now require credit checks on potential tenants. If you do not have positive credit, you may not be able to rent an apartment or home that you like, in a location that you like.
  • Get a Mortgage ~ Bad credit will prevent many people from realizing the dream of home ownership or can limit the size, type and location of home they can buy.
  • Get an Auto Loan ~ Bad credit can keep you from being able to buy a car, or can limit the size and type of car you are able to be approved for.
  • Get Affordable Insurance ~ Many Insurance Companies use your credit score to help determine rates and / or eligibility. With bad credit, your rates can be higher or you could be denied coverage.
  • Get a Credit Card ~ Today, having a credit card is almost a requirement to rent a car, get a hotel room, book an airline ticket or travel. Also, most online purchases require use of a credit card. Bad credit can greatly limit or prevent you from getting a credit card.
  • Get a Low Interest Rate ~ Your credit score directly affects the interest rate that you pay on loans or credit cards, as well as the amount of finance fees you may incur.
  • Open a Bank Account ~ Many Banks now require credit checks to open checking and / or savings accounts. Without meeting minimum credit standards, you may not be able to open a bank account.
  • Own Your Own Business ~ In the absence of a lot of working capital, you will need positive credit history to establish business lines of credit or to qualify for business loans.

  • Building or Rebuilding Positive Credit

    The first step to building or rebuilding positive credit is to know what your credit score is, know what information is in your credit history, and understand what it means. You should regularly check your credit score at one of the free online credit report companies (Equifax,  Experian,  TransUnion) at least every six months to a year. By knowing what is on your credit report you will see what others see, and can plan the steps necessary to correct and improve any credit deficiencies. While some items on your report can be immediately corrected, others just take time. Here are a few ways to establish positive credit or to help reestablish damaged credit:

  • Employment ~ Maintain continuous stable employment. The longer you stay with the same employer, the better for your credit rating. Demonstrating stability by way of continuous employment with no gaps and no periods of unemployment also helps your credit rating.
  • Residence ~ Maintain continuous stable place of residence. The longer you live at the same address, the more it helps your credit rating. Demonstrate stability!
  • Checking and Savings Accounts ~ Open and maintain a checking and / or savings account with a major bank or credit union. There are lots of online banking options these days like  Bank of America,  Wells Fargo Bank, and Fifth Third Bank
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  • Utilities ~ Get as many of your household utilities in your name as possible. This will help establish a stable history of regular payments associated with your personal information.
  • Rent, Lease or Mortgage ~ Again, make sure your name is on the lease, rental agreement or mortgage where you live.
  • Store Credit Cards ~ Apply for ONE or TWO at a time ONLY and you ONLY need ONE or TWO open department store credit card accounts! Applying for multiple credit cards at a time or having more than a few new open credit cards can actually hurt your credit. Department store credit cards are generally easier to qualify for and have lower credit limits. Some good options to consider are  Sears Credit Card,  Wal-Mart Credit Card,  Target Credit Card,  JC Penney Credit Card,  Lowe's Credit Card,  Home Depot Credit Card, and Kohl's Credit Card.
  • Personal Loans and Payday Loans ~ Again, ONLY apply for one at a time, and you never want to have more than 2 personal loan accounts open at time. The secret here is to take out small, manageable loan amounts and make timely payments. Small unsecured loans are an excellent way to build credit. Consider contacting quality lenders like  Payday Loans XXX,  Payday Loans XXX,  Payday Loans XXX, and Payday Loans XXX.
  • Bank and Credit Union Loans ~ Once you have built a little positive credit over several months, apply for a small, short-term (6-12 months) personal loan with a major bank or credit union. This type of credit is a very powerful way to establish quality credit quickly. Even if you have to open a CD or Deposit Account and borrow against it, it is well worth the boost this type of loan can give your credit score. Check out programs from top-tier financial institutions like  Bank of America,  Wells Fargo Bank, and Fifth Third Bank
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  • Major Credit Cards (VisaMasterCardDiscover CardAmerican Express) ~ The same rules apply here as with Store Credit Cards. ONLY Apply for ONE or TWO at a time and you ONLY need to have ONE or TWO open credit card accounts! There are many credit card options specifically designed for people trying to build positive credit or rebuild bad credit. FYI - Adding your name as an authorized user to someone else's credit card account will not help your credit score. FICO recently eliminated authorized users from their credit scoring formula. A few good options would be Orchard MasterCard, Tribute Gold Card
  • , or XXX Credit Cards.

    Keeping Your Good Credit Good

    So you have worked hard, used a lot of the suggested methods for building good credit, and built up a solid credit rating. Now you just need to continue to take pro-active steps to sustain or continue to build your positive credit history. Any negative marks on your credit report can quickly erase your recent efforts and adversely affect your ability to obtain new credit and/or new types of credit.

  • Make sure you are being accurately reported ~ Be sure that all of your creditors are reporting your information to all three of the major credit reporting companies.
  • Continue to monitor your credit report ~ Continue to get a copy of your credit report at least once a year and review it thoroughly. Make sure all of your accounts are reported, the data is up-to-date and accurate. Contact the respective credit reporting agency(s) and dispute in writing any discrepancies or inaccuracies.
  • If and when you cannot make a payment on time ~ Contact your creditor SEVERAL DAYS BEFORE THE DUE DATE. Try to make acceptable arrangements. You are better off borrowing the money from a friend or relative to make the payment on time, then paying them back. Remember how hard you worked to establish positive credit?
  • The Bottom Line ~ Pay all of your bills on time, every time, whenever they are due! This one simple trick will help you to continue to build your credit and allow you to establish more new credit in the future.

  • Building Positive Credit Is All About Momentum

    With some effort, planning, the right steps and a little follow through anyone can begin to build a positive credit history. Building or rebuilding credit is like a snowball, start moving in a positive direction and momentum will continue to carry you. Just remember the same thing is true for bad credit. Start moving in a negative direction and things can snowball out of control. So always be credit-wise and credit-careful.

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