Easiest Way to Establish Credit

Without a strong credit history, doing many of the basic things in life, such as buying a cell phone, establishing insurance or getting a job, can be difficult. Your credit score plays an even larger role in your ability to purchase a car or home, and can have significant financial implications in the way of interest rates and down payments. Building a good credit score is important to your financial well being and future investments. The task must be undertaken with discipline and care.

Instructions

1

Check your credit report to see what, if anything, appears on your report. You will be able to see both positive and negative aspects of your credit from this report, which is free once a year through Annualcreditreport.com. This will help you understand where you stand in the eyes of current and potential creditors. You should check your credit report at least once a year to review accuracy and understand how creditors view your history.

2

Obtain a checking and savings account, which lenders perceive as indications of stable finances. These accounts will also help you build financial history and a relationship with the bank or credit union.

3

Open a joint account with an individual with good credit history if possible. Having a co-signer on a loan or being a joint account holder on a credit card essentially allows you to borrow the other person's credit in order to establish your own. This is particularly helpful if you pay your loan and credit card payments on-time and in full, as it will boost both individuals' credit scores.

4

Apply for a credit card, whether secured or unsecured, to build a credit history. Use the card at least once every six months to keep it active. Be careful not to maximize usage of the card. Keep the balance at less than 30 percent of the credit limit for the card to have a positive impact. Ideally, the balance should remain at less than 10 percent or even be paid off, which still increases your credit score without putting you at financial risk. Department store or gas company credit cards are also great for boosting credit scores and are generally easier to obtain.

5

Obtain an installment loan, such as a mortgage, auto or personal loan, to diversify your borrowing history. The best place to start is with a small, short-term loan that is easy to pay off and does not have significant interest costs. This not only increases your score if paid in a timely and accurate manner, but also builds a relationship with your bank.