It has been said that it takes money to make money. Anyone with little or no paymenthistory can tell you it’s the same for credit – It takes previous paymenthistory to build credit. It can be hard to get someone to approve you for a loanif you don’t already have a loan so lets look at some ways to get it.
The first step to establishing a credit history is opening a checking or savings account. While maintaining a checking or savings account has little effect on your actual credit score, it can be a huge factor in getting your first loan approval. Lenders are looking for responsibility and bank accounts are a good first step.
Now that you have a bank account it is time to get a credit card. Do not just fill out everyapplication you come across in hopes someone will say yes. All three bureausbureaus keep track ofinquires and a sudden increase in or overall large number of inquires sends up the red flag. Instead, start with applying for a secured credit card. This is the easiest way to build score. Many secured cards can even be converted into an unsecured card after you build a good payment history.
Once you have established a good payment history with your credit card it may be time to diversify your credit. This means applying for a personal loan, auto loan, or mortgage. Start off small; remember you are still building your credit history. A diversified personal generally leads to higher scores.
If you are still having a hard time getting approved for a loanit may be worth getting a co-signer. Co-signers basically ‘vouch’ for your ability to pay for the loan and agree to take over your responsibilities should you fail to pay. Make sure your co-signer has an excellent credit rating though. Using a co-signer with a bad historywon’t help you build credit; it may actually harm your rating score.
Now that you have credit it is important to maintain it. There are two things every goodreport has in common, a low ratio of balance to availableavailable balanceand a timely payment history. Maxing out acards will hurt yourscore even if you make timely payments. Most experts recommend using no more than 25% to 30% of your available balance at any time. As for timely payments, if you are the type of person who tends to forget when bills are due it may be best to set up a reminder system. Remember to build historyyou have to maintain your payments schedule. One missed payment could bring down a score that took years to build.
Author: Bo Majors
Source: ezinearticles.com
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