Tips for a beginner to establish good credit?

Question

I'd appreciate any help or advice on how to establish a good line of credit in a reasonable amount of time.

Answer 1

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The best way for a person to start on the road to good credit is to get a credit card. Get a card that does not have a yearly fee or anything you have to pay just to have the card. If possible, get a card that will earn you something with your spending (such as the Borders card that earns you points toward gift certificates). Once you get the card, make a purchase. Perhaps, use the card to pay your monthly costs (such as groceries, gas, etc.). Then, pay the balance at the end of the month. Make sure to pay your bill on time every single month (Most cards offer auto-payments that you can set up. I find this works the best for me, so I never have to worry about late fees). Don't let yourself get carried away and buy more things on the card than you could possibly pay off, however having a balance over a few months, instead of paying it off every month, can be a good thing for your credit. Just make sure you pay it on time, don't get late fees, don't go over your balance, and don't spend more than you can afford. If you do this, the card will build you good credit within 6-12 months, maybe less.

The only other thing that I can suggest is going to your bank and asking them to give you a small personal loan to help you build credit. They often will give people secured loans, so they can help. A secured loan, in a nutshell, would mean that you would open an account for them for the amount you are borrowing, and then pay the loan off month by month. That way, they know the money is there, in case you didn't pay them, but you are getting credit (no pun intended) for paying off a monthly personal loan.

You can always try both of these, but the credit card is the easiest way to go. I am glad to hear that you are trying to get good credit set up from the opening gate. I wish there had been someone to guide me when I was starting out! Good credit will open doors for you throughout your entire life. Bad credit will hinder you at every turn, and it takes a lifetime to fix. Good luck to you! I hope you can get fabulous credit. If you get a credit card though, just make sure you get ONE. A lot of people accept all the offers they get, and they get themselves in LOTS of trouble.

Good luck!

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Asker's Comment:

So helpful !! and a big Thanks to ALL who contributed to this question :-)

Answer 2

Start with a department store or gas station credit card. Pay it off IN FULL and ON TIME. That's the best way to start.

Give about six months to build up a good credit report before you move onto the next credit card or whatever you're thinking of.

Answer 3

yeah i remember i was trying to as well a while back. basically my dad said sign up for those no interest the first yr credit cards. and then charge it, and pay your bill on time every month. and also get a job so you have money coming in to your ssn#, thats how i started.

Answer 4

I agree. Don't get a credit card. Get a debit card. But what you can do is get a debit card, and then apply for an Old Navy card, or something like that. Then you make sure the you pay your bill, through your debit account, on time every month. Or make lump payments.

Answer 5

i'd suggest getting a credit card ... now, you have to be super careful w/ these stupid things. they can be so dangerous. buy a pair of shoes that you know you can pay off w/ your next statement & charge them to the cc.
the worst thing i ever did though was using the cc for dumb stuff ... credit cards are a good thing, but you have to be so careful as to not use it & not pay it off right away.
also, if you live on your own or are going to move out soon, getting your utilities set up under your name & paying on time should help too.
= )

Answer 6

Don't go into credit card debt.

Make all your payments (if you use credit cards, phone bills, hospital bills-- anything that could be turned in to collections) on time.

Shred your personal info after you're done with it so no one can steal your identity.

There is also an amazing book called "Total Money Makeover" by Dave Ramsey-- my husband and I did it and we're working on getting out of debt. It's a great book and the author is someone who had to declare bankruptcy at one point. He is now a national speaker and has a radio show about how to handle money.

Source(s):

"Total Money Makeover"-- Dave Ramsey

Answer 7

well get a credit card and use it but pay the full balance every month. Make sure you do not max out the allowed balance on your credit card as that can make it go down, make sure you do not have too much debt, and dont do so many credit checks, instead, you can set up an account at the true credit website and you can check your score at any time and it will not affect your score, make sure you never make a late payment on any bills or mortgage payments because that can affect it a lot.
Too many un-used credit cards can also drive down your score

Answer 8

Firstly u need to change your attitude , need to be well discipline
Try to study when its in calm situation , most probably study early in the morning and always ask your self to be more confident

Hope it helps

Source(s):

List down all the distraction that may effect your studies and throw it away

Answer 9

Stay away from credit cards they will get you in trouble.....But that's prob the only way to establish credit. So get one and pay it off every month!!!! Don't pay the minimum cause they will rip you off with finance charges. Use it wisely or it will set you back and you will lose money. Good luck!

Answer 10

Create a balance sheet of your income and expenses. Know what you can afford.

Open 1 credit card first. As a student that seems to be very easy. If you are not a student you might have to start with a department store card.

Rule for credit cards:
1) Always pay on time (watch your payment date they change to trick you into paying late. Banks make more money on penalty fees than any other income)

2) Always pay more than the minimum. If you can pay off in full. But it is good to keep a balance from time to time to show that you can pay of a larger amount.

3) Keep an eye on your interest rates and fees. Call the credit company right away if they raise them without a cause. Ask them to lower them. Be prepared to cancel the card if they refuse to work with you.

Pay your rent, mortgage and utilities on time.

Don't open or cloth credit accounts 3 month before you might apply for a loan or mortgage.

If you are a business you might qualify for a revolving credit account.

Don't switch jobs to often. Yes is shows up on your credit report.

Answer 11

Get a credit card, or line of credit with your bank (or both!).
Try and use them every once in a while, maybe 3 or 4 times a year. But only spend money on them when you KNOW you have enough money to pay the entire balance, within the month (when you receive your bill).
Example, don't buy a $1,000 sofa, if you only have $500 in your bank account. You will end up with $0 in savings, and a $500 credit balance, PLUS interest.
Do this for a year or two, and you should have excellent credit.

Answer 12

Ah - an easy one.

Assume all bills possible. Then pay them. Get a starter credit card (say from Capital One) of a relatively low limit: like about $300-$500.

Now, rules for usage: don't use more than 60% of your available credit. Use sparingly. If you max out your card, it actually causes a huge hit on your credit score.

What you can do to alleviate that, as far as I've noticed (and practiced...) is that if you pay off 95% of the balance before the statement comes in, your credit card company will report it to the bureaus as 95% paid with a small balance, which you then pay off ON TIME and it quickly reads as "paid on time." This is really good to do because your credit score will remain high while you can "cheat" the system, but they've added a new field called "high balance." This old trick probably won't work anymore, but it's worth a shot.

Just pay your bills on time... ON TIME. The minimum payment at the least as well. It doesn't matter to the bureaus how much of the balance you pay, just as long as you pay the minimum. Don't ask for too many loans, and don't apply for too many credit cards. Inquiries also hit you hard. It takes about 3 years to become recognized enough to get decent/good rates on loans and such, so be fore warned - it won't be an overnight things.

Answer 13

Make sure you're fiscally responsible. Get yourself a low limit store card or credit card. Yes, credit card. Make sure it's a no-fee card.

Charge some items and pay your bill ON TIME. Don't go whole hog and charge up to the limit and carry a balance.

You could also ask your parents, if they're in good credit rating, to put you as an authorized user onto one of their cards. That way you get the benefit of their paying ON TIME of their cards. Of course, if they miss a payment or make late payments that will adversely affect you.

When you have your own, or share, an apartment the utility bills will count towards your credit score. You can build credit by having them put into your name.

Make sure you never ever miss a payment or make late payments on any bill. If you have credit cards try to pay in full each month so you don't get charged interest. Also try to pay on-line so you save on checks and postage.

Here's a few good articles to read as well
http://articles.moneycentral.msn.com/Col…

http://articles.moneycentral.msn.com/Ban…

Answer 14

If you are in college, then your student loans will build credit.
If you decide on a credit card, be careful, do not spend more than 40% of available credit (this can hurt your credit)
Utilities establish a credit history, car payments, car insurance, cell phones, etc...

Just be very careful, pay at least 5 days before due dates, don't max out avail. credit, pay close attention to fees, apr, du dates, bill dates


edit: paying entire credit card balance each month does not improve credit because you are not paying any interest. Credit card industry is a business, they are out to make money, if you have credit with them, and pay in full every month, there is nothing to report to the credit bureau, therefor no change in credit history

Source(s):

Employed in the Credit Card Industry for over 5 years now.

Answer 15

If you go with using just a debit card, it doesn't get reported to the major credit agencies that determine your credit score.

Go for a credit card, but GET ONE WITH NO APR! Interest rate won't matter, because you MUST pay off the card every month. All you have to do is make one SMALL purchase, just ONE every month. This way, your credit is being reported to the credit agencies, and goes to your credit score.

Avoid applying for credit often, and avoid frequent checks for your credit - that hurts your score. Anytime you make a large purchase (such as a car), that will lower your score - because that total loan amount is going on your credit report. Paying it on time every month will raise your score back up.

The goal is to show that you have credit, and that you do pay it off on time every month - that'll make your credit score rise dramatically.

I'm not sure what your definition of a "reasonable amount of time" is, since good credit takes time to build up. A score of over 820 usually takes a lifetime to achieve - although anything from 650+ is good for all major purchases, and can take anywhere from 6 months to 3 years, depending on past credit history.

To start off, you can get your credit score (free every year) - on the reports you recieve from the 3 major credit agencies, the notes will give you a hint on how to increase your score.

Answer 16

1. Deposit money into a bank account. Let's says it's $500 dollars. But any amount will do.

2. Thirty days later, take out a secured loan from the same bank against your $500 deposit. The bank will gladly lend you the money; there's no risk on their part because their loan to you is secured 100% by the money you have on deposit. As the payments are due, whatever payment amount you make against the loan, that same amount frees up to be withdrawn from your savings account. Now you can draw from that savings account each month to make payments against your loan note!

3. Take the original $500 you got from the secured loan and do the same, one at a time, perhaps to four more consecutive banks. In other words, deposit the money, thirty days later take out a secured loan, go directly to the next bank, thirty days later get a loan for your deposited amount. And so on, and so on.

This is how you'll look on paper:

You'll have your original money sitting in your hand. Your credit will show loans from 5 different banks that your have AAA rating because you're paying all your banks on time. Also, you will have total combined savings on paper of $2500, which will make you look like your saved a bit.

When you've paid off the first bank, you will look splendid in that bank's eyes as well as in the eyes of all potential creditors.

After that, you may be able to go to any of these 5 banks and ask for an UNSECURED line of credit for virtually anything your heart desires. You'll be on your way in the eyes of the banks you've done business with. And your credit file will reflect well with all others who care to look you up with your permission.

Good luck.