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By Charles Essmeier
Building credit can be a chore if you have little or no financial history. The first thing creditors want to know when you apply for a loan is what sort of credit history you have, and they will assess your credit report or credit score to probe your past. How can you establish credit if you have none? If you have limited credit history, it can make it hard or nearly impossible to obtain a loan.
Here are a few tips that could help you on the path to building a solid financial record.
Open a bank account. Make a habit of using your bank accounts regularly by putting away money for an emergency and by paying your monthly bills by personal check. It is a small start, but these are financial transactions and they will help you build a credit history. Be aware that writing bad checks will offset the purpose of having the checking account, so use the account sensibly.
Be prepared to wait. You should use your savings or checking account and secured charge card for a year or so, making routine payments. In time, you will build a credit score that should earn you the ability to get better credit card accounts and small loans. Waiting can be hard, but building any kind of credit score takes time.
Check your credit report. You can receive a copy of your credit report for free at annualcreditreport.com. Make sure that the information on the report is OK, and search for errors. It has been estimated that almost a quarter of all credit reports have errors; if you have another individual’s debt recorded in your name it could reduce your ability to obtain a credit card or loan for years.
Obtain a secured credit card. A secured card is one that has a limit that is guaranteed by a cash deposit. The risk to the card-issuing bank is modest, as they have your money on hand in case you do not pay. Be sure that your bank will give information about the card and your use of it to the credit reporting agencies. Secured credit cards tend to have higher fees and rates than traditional cards; you don’t want to use one if it isn’t going to help you in any way. A card with a limit of as little as $100 could be useful if you use it frequently and pay your bill in a timely manner each month.
Establishing credit takes time and effort, but it is well worth it.
About the Author: Copyright 2007 by Retro Marketing. Charles Essmeier is the owner
RetroMarketing.com
, a firm devoted to informational Websites, including
Debt-Stopper.com
, a site about debt consolidation, personal bankruptcy and other financial matters.
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