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By Jonathan Croswell
How to Establish a Credit History
No credit is better than bad credit. But how do you establish good credit? Consider these options, including having bank accounts, utilities, and credit cards in your name.
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By Jonathan Croswell
OverviewIf you don’t have a credit history, don’t worry. No credit is better than bad credit. Having no credit history can be difficult when you try to obtain your first credit card or your first loan from a bank, but it isn’t hard to build up. The more responsible you prove yourself to be with small amounts of credit, the more your credit score and positive credit history will grow, leading to higher limits and more allowable credit.Step 1Open a checking and savings account, and keep both in good standing. This will help build your reputation with the bank. The bank will use your management of these accounts to weigh what kind of risk you are in future credit requests.Step 2Remain stably employed, and pay your rent on time. The more consistent your employment, the better this looks to banks. Similarly, maintaining a lease in positive standing is a sign of fiscal responsibility that can be weighed in a decision on credit.Step 3Put utilities—heat, water, gas, sewage, garbage—in your name. You don’t need credit to put most utilities in your name, but on-time payments can be a big benefit.Step 4Open a credit card account and pay the balance in full every month. Banks weigh credit scores not only on how you make the monthly payments on your credit cards but also based on the percentage of your total credit limit used every month.Step 5Apply for various forms of credit, as long as you have proved yourself capable to handle your bank accounts and credit cards responsibly. The best credit scores are ones made up of different accounts, such as personal, auto and credit card. Take on small short-term loans to build credit while avoiding large sums of interest.skill2tipBuild credit quicker by co-signing on a loan with someone who has good credit. As long as you pay these loans off promptly, your credit score will rise.tipsBuild credit quicker by co-signing on a loan with someone who has good credit. As long as you pay these loans off promptly, your credit score will rise.warningDo not take on more credit than you can easily pay back within the agreed-upon terms. Falling behind on payments, defaulting on loans or being forced into settlements will show up on your credit report and lower your credit score.warningsDo not take on more credit than you can easily pay back within the agreed-upon terms. Falling behind on payments, defaulting on loans or being forced into settlements will show up on your credit report and lower your credit score.keywordestablish credit history score moneykeywordsestablishkeywordscreditkeywordshistorykeywordsscorekeywordsmoneyResourcesreferenceMSN.com: Money CentralreferenceSmartCreditTips.com
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