A good credit history is nearly indispensable. Without it, you’ll have trouble buying a car, renting an apartment, and perhaps even getting a job, since some employers order job applicants’ credit reports. Here are ways to establish a good record:
Start by ordering free credit reports from the three major credit bureaus. What’s the point if you don’t have a credit history? Because you want to make sure no one has appropriated your financial identity.
Open a bank account. Having an account won’t directly affect your credit reports, but credit applications generally ask for bank information. Be aware that negative banking information, such as check-bouncing, will show up on your credit report.
If your parents have good credit, ask one of them co-sign for a credit card with you or include you as a user on one of their cards. Use this privilege responsibly because missing a payment will hurt your parent’s credit scores as well as yours.
Apply for a secured credit card or credit line. Secured credit requires you to make an initial deposit that then serves as your credit limit.
Don’t hold more than one or two cards. Too many can make lenders nervous.
Use your credit card for necessities only, and keep your debt under 30% of your credit limit. If possible, restrict charges to amounts you can pay off each month.
Obtain and hold a steady job. Potential lenders regard employment history as a major factor in deciding whether to extend credit.
Pay bills on time. A poor payment history can negate all of the positive steps you take.
Once you’ve begun establishing credit, make a full circle to where you began by ordering free credit reports from the three major credit bureaus each year. After all your work establishing a good credit history, you’ll want to protect it by correcting inaccuracies.
Laurie C Nafis, MSA, EA
Certified QuickBooks™ ProAdvisor