How To Build Credit

Building A Good Credit History is Important.

Having a good credit history is important to build a secure financial future. Your credit history is taken into consideration when applying for loans and when you decide to make major purchases such as a car or your first home.

Building credit for the first time can be a difficult task. Few credit companies are willing to extend credit to those who have not established a solid credit history. In order to establish a credit history, you need to borrow money and pay it back over time. By making your payments on time, you'll begin to establish a good credit history.

The Key is Creating a Record of Borrowing and Repaying.

To build your credit history, the essential step is to create an account and have your good payment history recorded on your credit report.

A credit card is a good place to start. Credit card payments are regularly reported to the three credit bureaus. Learning how to own and use a credit card helps in building a trusted credit history.

Use the card and make sure you pay your bill on time! It can take anywhere from several months to a couple of years to establish good credit this way, depending on the lender's qualifications and your own circumstances.

Learn How to Establish Your Credit: Your strategy and disciplines are important.

1. Secured Credit Card: The Quick Route

One of the fastest ways to get credit is through secured credit cards. A Visa or MasterCard, paid on time over time is the strongest credit reference you'll ever have! For building good credit, it's even better than a mortgage or car loan. A secured card can be one of the most important tools you can use to establish your credit.

They are easy to get regardless of your credit history unless you have a serious credit problem. These days more companies are offering these cards for credit builders and rebuilders.

A secured credit card is a VISA or MasterCard that has been secured by a deposit to the issuer's bank. In essence, you are guaranteeing your line of credit with the deposit. Later, you can switch to an unsecured -- traditional credit card -- once you have established that you're a good credit risk by paying off balances for approximately six months to a year.

A secured credit card is just the first step. Once you have built a solid credit history by paying your bills on time over 12 months or more, you can apply for an unsecured card. Or, you can talk to the card issuer about converting from your present card to a regular card. Before long offers for credit cards and more will be coming.

List of Secured Credit Cards:

• NMB Platinum Card
• Orchard Bank Secured MasterCard

2. Unsecured catalog card: Generous credit lines with buying power

Catalog cards are also good for credit building. Your payment history will be reported to major credit reporting agencies.

Catalog merchant cards usually provide generous credit lines for you. Thus you can increase your buying power. These cards work like a retail charge card that can only be used for selected purchases and/or services.

List of Unsecured Catalog Cards:

• USA Platinum Credit Card
• Prestige Gold
• American Platinum Card
• BuyRight.com Platinum Card

Tips on Getting Your Credit Report Filled with Positive Record

It's going to take time to establish a credit history. A credit history is just that -- a history of how you make your payments. It takes at least six months of good payment history before your credit score will be affected. Here are some general tips if you need to establish credit

• Open a checking account and pay all bills with checks.
  Although checking accounts aren't "credit," checking and savings account history can be included in your credit report. Keep the checking account active and manage the money carefully-don't bounce checks. Bad payments are almost as bad as no payments.
  
  
• Pay your bills ON TIME.
  The single most important thing in building credit is that you pay your bills on time. Each time you are late with a payment, that goes on your credit report. A history of late payments makes you a higher risk.
  
  
• Join a credit union if you're eligible.
  If your union membership makes you eligible for membership in a credit union, you may want to open an account-especially if the credit union offers Visa or MasterCard cards to members. Ask them for some help getting one of their credit cards. Credit unions are easier to work with as a first-time borrower.
  
  
• Apply for a retail or gas card.
  Try applying for a retail card with one of the large, well-known department store chains. For people trying to get their first card, retail or gas cards are usually easier to qualify for than major credit cards, as long as you have a steady job and income that can be verified. If you use it to make small purchases and pay it off, you'll build a good credit history.
  
  Since you have to buy gas many times a month, getting a gas card could eventually help you establish good credit. Don't pay cash.
  
  By making a few purchases and paying the bills on time for at least a year, you'll build a credit history that can help you qualify for other cards and loans.
  
  
• Purchase a CD, and take out a loan from the same bank using the CD as collateral
  Because the bank has no risk, the terms of the loan should be very reasonable. This is also a good tip for someone who has a CD and has a temporary cash flow problem, but doesn't want to pay the early withdrawal penalty. Make your payments as agreed. Do not pay off the loan early.
  
  
• Apply for a small loan for a planned purchase.
  If you are working or have been saving toward a middle-sized purchase such as a computer system, you may wish to consider taking out a small loan to pay for it.
  
  
• If you are a college student, apply for a student credit card.
  If you are attending college, you have an excellent opportunity to establish credit now. You will most likely be able to score a major bank's credit card without much problem. Credit issuers do not expect to see a lot of income or stability. They're willing to hold you on your future success by investing in your loyalty now. If you wait until you graduate, you will have a much more difficult time.
  
  List of Student Credit Cards:
  • Chase Platinum for Students
  • Chase Universal Entertainment Student MasterCard®
  • Citi® Platinum Select® Card for College Students
  • Discover Student Classic Card
  • Discover Clear Card for Students
    
    
• Get your name on the bills at an early age.
  Another way to build credit is to get your name on the bills at an early age. If you rent, have the place under your name. Same thing for utilities, cable, and telephone accounts. The more you have under your name and the more often you pay off these bills in full and on time- the better your credit record will be and the earlier it will become established.

• Check you credit report regularly.
  It pays to know where you stand when you begin trying to establish good credit. You may think you have spotless credit, but mistakes do occur and it is better to be safe than sorry. Especially since it can take a while to correct a mistake.
  

  Go to Credit Report page to order your credit report.

  
  

And Maintain Your Good Credit History

Not only obtaining credit, but keeping a good credit rating is one of life's imperatives. If you want a good credit rating and a good credit score, follow these steps:

• Pay your bills on time. Even if a company allows a grace period, don't use it. It lowers your credit score.
• Own between two and four credit cards. Fewer cards shorten your credit history; more cards indicate that you are financially stretched.
• Keep your debt-to-income ratio under 20 percent.
• Make infrequent requests for additional credit.
• Pay more than the minimum required on your credit card. Not only do large credit card balances hurt your score, the interest rate on credit cards is exorbitant.
• Check your credit report regularly.