Establishing Credit Is An Important Milestone

Establishing and maintaining a good credit history is necessary, because sooner or later you are going to want to purchase something on credit.  Most people will need to borrow money to purchase a new car or home, which is why establishing and maintaining good credit is so important.  Here are some important tips to help you begin establishing and building your credit now.

An important first step to establishing credit is to determine what shape you are in financially.  Banks and other lending agencies want to lend money to qualified individuals and businesses.  The interest that is collected on these loans is a major source of their revenue.  Individuals borrow money for home mortgages, vehicles, vacations, home improvements, personal needs, commercial ventures and many other reasons, and many people couldn't afford these "big ticket" items without having access to credit.  So it is important to begin establishing credit as early as possible.

Keep a close watch on your checking account, or if you don’t have one, open one now and get a debit card.  This will not show up on your credit report, but it will show that you can handle money and do it responsibly, which is a very important step to establishing credit. 

A savings account would be beneficial in providing a record for a company checking your credit.  It could also help in case you need a small down payment for a purchase.  By having an account at a reputable bank and paying all of your living expenses on time... such as, electric, telephone, rental agreements, cell phones, cable, etc... you are well on your way to establishing yourself as a trustworthy loan consideration.   

Banks or other lending agencies consult your credit history from one or all three of the credit bureaus that are in this country. (See credit score and credit report on navigation bar).  Private corporations oftentimes have their own system of credit scoring within their company, that is why it's so important to keep your monthly expenses up to date.  This helps to establish your financial credibility, plus you are building a good credit history.

Try not to over-extend and “juggle” your bills each month.  Companies maintain a record of your payment history, so be consistent.  Establishing credit often requires a consistent record of sound money management.

If you have no payment history at all, try getting one or two credit cards from either a gasoline company or a department store, then always be sure to pay off the entire balance each month.  This way you'll begin to establish a credit history, plus you'll be establishing credit responsibly.

Once you receive a credit card and begin using it to make purchases, you begin establishing your credit history.  Using a credit card to pay for purchases is one of the best ways to begin establishing your credit, provided you can pay them off, or make the monthly payment within the 30-day grace period.  If you don’t, they will accumulate into late charges.  This can have a negative impact on your credit report as well as your credit score, thus making it much more difficult to get your credit established.

If you're in debt now, try to get out quickly.  Reduce your spending habits and cut up your credit cards!  No one wants the possibility of a bankruptcy on their credit report, since they stay on your record for up to seven years.  Also, don't let credit card or loan payments go into delinquency, this can make establishing credit more difficult! 

Don’t get out of control with your spending... It’s easy to do!  Focus on paying all of your bills on time.  Remember, your best case scenario is to establish good credit and protect it, so that restoring credit never becomes necessary.

The most important thing to remember when establishing credit is to always make your payments on time.  These payments work together to create your credit profile.  Once you have established good credit, it is important that you limit your credit purchases to what you can truly afford.

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