How to Begin a New Credit Record

Building credit is the first step to financial adulthood. Having good credit not only allows you the ability to get credit cards and borrow money, but a strong credit score will give you lower rates when buying a car, home or starting a business. Also, many employers require a credit check when applying for a job.

If you are just starting out, beginning a credit record may be overwhelming, but if you do it the right way from the outset, it will provide you with financial benefits for the rest of your life.

Instructions

Getting Credit

1

Even if you don't have any credit, check your credit report to make sure there aren't any discrepancies. You are legally entitled to a free credit report each year from the three major credit bureaus: Experian, Equifax and TransUnion.

If there is information on your credit report that is wrong, correct the situation by contacting the appropriate credit reporting agency and filing a dispute.

2

Open a savings account to give your loan or credit application a better chance of being approved. Lenders will see you as more financially stable, and the account gives you a way to begin to build a financial history.

3

Apply for a credit card with a local department store. Store cards are often easier to obtain than other credit cards.

4

Get a secured credit card. A secured credit card allows you to borrow against money you have already put up as a deposit. Financial institutions see this as much less risky.

5

Get a co-signer. By using a co-signer, you are piggy-backing on someone else's credit history. The co-signer agrees to pay back the loan if you don't.

Maintaining Your Credit

6

Understand your credit score. A credit score takes into account essentially two things: how much of your available credit you use and whether you pay your bills on time. A credit score ranges from 850 to 300. Anything above a 700 is considered a strong credit score, while below 600 is considered a risky credit score.

7

Shop around for the best rates. Different credit card companies offer different rates and terms on their credit cards and loans. Look for the lowest interest rate, highest rebate benefits and most flexible payment scheme. There are many financial companies that claim they have such programs in place, but you need to confirm. Check the background of your chosen lending company as well as its reputation.

8

Pay your bills on time. The willingness of lenders to extend credit is directly related to your payment history. If you are too busy or afraid you may forget to make a payment, have it automated. Most credit cards and lending companies allow you to pay your bills directly from your checking or savings account. If you fail to make just one payment, you are jeopardizing your credit score and your credit history.

9

Manage your credit. When working with revolving lines of credit such as credit cards, try never to have a balance that is more than 30 percent of the card's limit. Also, if you can, pay off your balance every month. This will limit your interest payments and keep your credit history active and healthy.

10

Keep track of your credit. Credit records don't stop at the time you receive your credit approval. This is just the beginning of building a good credit reputation. It is important to keep records of all your credit transactions and handle any problems as soon as they arise.