Start building your credit history. It is difficult to survive today’s economy without credit. Many businesses consider your credit history, even to those who do not lend you money directly. For example, service providers look at your credit history because they “lend” you one month of utilities and require you to pay later. Without a good credit history, utilities may require you to pay high security for setting up the service.
You need credit history as soon as you log in to open accounts on your behalf. Building a good credit history before you really need it will make your life easier. Here’s how to get started.
Basic steps in building a loan
Step 1: Get a job. Your work status does not directly affect your credit; it’s not one of the five key factors that affect your credit score. However, having a steady income is a prerequisite for a major component in building a loan – borrowing money.
Step 2: Borrow money either by taking out a loan or opening a credit card. When you have a job and are 18, you can apply for a credit card or credit. Setting up a first credit account can be difficult, but there are some tried and true methods like retail credit cards, secured credit cards, or shared credit cards. Your bank or credit union may be willing to give you a small or lender loan, especially if it is secured through a savings account.
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Step 3: Pay and wait. Once you have an account in your name and use the account wisely, your credit begins to build as your creditor reports your account history to one or all three major credit bureaus.
This monthly credit reporting establishes your credit report, a document businesses use when deciding whether to grant you a loan. After your account has been active for six months, a Credit Checker score can be generated based on your credit report. Your score may be low because you’re just getting started, but it’s better than nothing. Be patient as the credit score builds.
Your credit history will get stronger as your accounts get older and as you open more accounts. How you keep those accounts will determine if you have built up a good credit history.
Building a good credit history
The following two basic rules will help you build a good credit history. First, pay your bills on a daily basis, even those not listed in your credit report. This is one of the reasons that business is critical to building a loan.
Without a steady income, you have no guaranteed way to make payments every month. Lack of payment will hurt your credit-building efforts and lead to poor credit scores.
Second, borrow only what you can afford. If you download more than you can handle, you may have trouble paying, and if you fall behind, you can destroy your credit history.
What you can afford to repay depends on your income and expenses
People who earn more and live below their means can afford to borrow more. On the other hand, if you have low incomes and little money after the bills are paid, then you cannot afford to borrow much.
Building a credit history is not difficult to do. It simply requires you to borrow money from a business that reports regularly to credit bureaus. Practice responsible lending to build good credit history and you will rarely ever have credit problems.