The Task of Establishing Credit

When it comes to credit, not having any credit can be just as inconvenient as having bad credit. If you don’t have a credit history, there are quick, effective ways of earning credit. The important thing to remember is that you only want to put good credit and not bad credit on your history.

If you don’t have credit, it won’t take you very long to realize that creditors are leery of approving you for a loan. A good place to start obtaining credit is to ask for a letter of credit from a company that you have dealt with previously. If this company doesn’t report to the credit bureaus, their word will be priceless. An example of such a company would be your electric company, or cable company. Basically, any company where you have established monthly payments with could be an option. In order to receive a letter of credit from a company, you should have had an account with them for at least a year, and, of course, you will want a positive history with them as well.

Another way to establish credit, either with or without a letter of recommendation, is to go to your banking institution. All banks offer credit cards and loan accounts. If you have banked with the institution for at least one year, they may consider extending you a line of credit. Whenever you open a credit account for the first time, your interest rate and monthly payments may be extremely high, but if you make your minimum monthly payments for at least six months, these rates will decrease dramatically.

The best way to get started building credit is by opening a small account that is easy to make monthly payments on. Remember that as soon as you open any credit account, creditors will start contacting you by mail, or by phone, trying to get you to open a credit account with them. Always be cautious about theses types of creditors because the last thing you want to do is start establishing bad credit by not being able to make your monthly payments.

Once you have started building credit, keep on eye on it. There are several, legitimate websites that offer programs that keep you informed monthly of your credit status. You also have one free credit report that you can request once every year from the credit bureaus. Once your credit becomes active, keeping track of your credit report can prevent the use of a fraudulent credit charge by an unknown user. It can also prevent the unfortunate event of somebody stealing your identity and using your credit. It could also help you find a lost payment that wasn’t reported correctly by your creditor. Plus, knowing what your credit score is gives you additional credentials when dealing with a new creditor.

As soon as you establish credit, be cautious when accepting additional credit offers. Be sure to look at the interest rate, the monthly payment, and any additional charges that might come with the offer. Remember that you already have other financial responsibilities such as rent, utility bills, car insurance, groceries, and so on. You are never required to accept any credit offer.

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