Good credit isn’t just a requirement when applying for a loan, it is also an important factor that determines whether your prospective employer will hire you or if you’ll get accepted by the owner the rental property you wish you obtain.
People often use one’s credit report as a means of verifying an individual’s credibility. We know that it’s important to build credit but just what are the ways to build credit? Here are the steps to building good credit:
Understand how a credit report works. Your credit report is determined by different factors. Generally, how good of a payer you are will have a direct effect on your credit score. Therefore, building good credit means being a responsible borrower and being faithful to your obligations. Factors that affect your credit score are the following:
* Timeliness of your payments
* The amount of your credit
* They type of credit you have
* The amount of your available credit
Open a savings account or a checking account. Opening a savings account is a great way to build credit and prepare for your future at the same time. Most banks accept even those below 18 years old to open a savings account.
Open a department store credit card. This is one of the easiest ways to start building credit. Unlike real credit cards, a department store credit card doesn’t impose very strict guidelines for approval. In addition, you can monitor your spending more easily to make sure that you’ll be able to pay off your balance each month.
Open a gas station credit card. Just a like a store credit card, a gas credit card is easier to obtain even if you don’t have a credit history yet. You can use this card on all your gasoline purchases. The important thing to make sure is to pay off your balance each month to build good credit.
Obtain a student credit card. Opening a student credit card will help you build credit early. This is especially important if you’re on your way to college. Establishing your credit history will prepare you as you’re about to graduate and enter the corporate world.
Get help from a co-signer. Usually, banks would require a co-signer for someone who hasn’t establish his own credit history. Your parents are the most ideal co-signer to help you build credit especially if they have excellent credit standing. Friends or relatives who enjoy excellent credit reputation are also great candidates as a co-signer. Just remember that having a co-signer does not relieve you from your responsibilities to the debts you owe. Although your co-signer will be held accountable for your unpaid debts, defaulting on your debts will ruin the credit history you’re trying to build.
Apply for a loan. If you have started building your credit, one way to enhance your credit score is by applying a loan. There are different types of loan that you may wish to obtain depending on your needs and financial capacity. You may apply for a car loan, a personal loan or a mortgage. However, bear in mind that if you get approved for a loan, it is crucial that you take your obligations seriously to keep your credit in good standing and to avoid being stuck in debt.
Get a credit card. Credit cards are great tools for building credit as long as they are used responsibly. Choose a credit card with the best rates and low fees. One or two credit cards should be enough to help you build credit. Use it only on purchases that you are absolutely certain you’ll be able to pay off on or before its due of payment. Be particularly careful on how you’re using your credit card and see to it that you will not be paying additional fees such as interest and penalties because of late payments. Heed the classic advice and always pay your bills on time.