Establishing Good Credit

Without establishing good credit it may prove very difficult to obtain financial assistance of any kind such as an auto loan or a credit card. An absence of prior credit history can lead to the same set of problems as an adverse credit history. Very often students and recently divorced or widowed women who have been operating on a joint credit with their husbands find themselves in a difficult predicament for precisely this reason.

It is quite ironic that if you do not have a good credit history you cannot avail of a credit card, on the other hand, you can not obtain credit because you have never had one. A perfect Catch 22 situation! The trick to break free from this vicious cycle lies in taking steps towards establishing good credit.

Listed below are a few tips for establishing good credit:

A) Check with your local bank or departmental store if they report the credits to the credit bureau. If they affirm, then apply for a small loan in the bank or a credit card from the local departmental store. If not, then the loan or the card may be useless for establishing good credit. It is better to opt for a loan with terms that can be satisfied without undue financial strain. Chances of getting a loan also increase with a large down payment. There are several credit cards with very low annual percentage rates. Read the fine print and be clear about the terms and conditions that apply to your account before obtaining one. Applying for a whole lot of credit cards in a short span of time may go against you since lenders may decide you incapable of meeting all the requirements. Hence choose the credit cards carefully after ascertaining that your income and other aspects qualify for the same.

B) In order to avail of a credit card without a cosigner you need to be 18 years of age or have a source of steady income. You may consider applying for a gas card which is relatively easy to avail for the purpose of establishing good credit. However care should be taken to see that the monthly installments are paid off regularly as testimony to the fact that you can pay bills responsibly.

C) In the event of a difficulty in obtaining a loan, departmental credit card or a gas card, try to get a cosigner. Then again payments need to be made scrupulously.

D) Open a checking account and a savings account. This is the means to reassuring your financial credibility among the lenders.

E) One of the golden rules to establishing good credit is not to overdraw bank accounts. Potential lenders regard bouncing checks as a reflection of the incompetent management of financial affairs.

F) Be aware of the expectations of the lenders and credit card issuers. Apart from the payment history good credit also depends on how often you change jobs and relocate. Being the owner of an apartment or a telephone number helps in establishing good credit to a certain extent.

G) Lastly, you may always avail of a secured credit card at a higher interest rate after depositing an amount. Just be certain that the company communicates with the credit bureau.