In order to establish good credit the first thing you need to do is to establish credit. It is a widely held fact that sometimes having no credit is almost as bad (if not just as bad) as having poor credit. If there is no established credit history, creditors will not know how to gauge an individual’s credit worthiness, so lenders will generally treat you as though your credit report has been tarnished by late payments, missed payments, defaults, etc. Consequently the likelihood of your application being accepted is not likely and so you are right back where you started. It is a categorical catch-22 because how are you ever going to establish a good credit history if very few lenders or credit card issuers are willing to take a chance on you? Alternatively, if you do have a few blemishes on your credit report there are ways to repair your credit so that you can be on the road to rebuilding your credit score. If this task seems daunting there are credit repair and credit counseling agencies available to assist you.
Generally, most people who are interested in building their credit up should first look to credit cards. Credit cards are the easiest way to establish credit so that an individual can start proving themselves but again you may encounter difficulty in finding a credit card issuer that is willing to assume that risk. However, be advised that, in light of that conundrum there are many issuers who do offer starter cards also known as secured credit cards. A secured credit card may not sound as glamorous as their unsecured counterparts but unless you have a co-signer who is willing to absorb some of the risk this may be your only option. The primary difference between secured and unsecured is a secured credit card requires a deposit that is typically equal to your line of credit (this lessens default risks). When you are shopping around it is important that you keep in mind a few things: the APR (annual percentage rates), any annual fees, and if the issuer reports to all three of the major credit bureaus.
Once you have your card, understand that building good credit is not difficult but it does not happen overnight; it requires a lot of time and patience. Also, if you have a not so good credit score and you would like to work your way up to good credit you too can benefit from these tips: if you can try to pay your balance in full each month, always pay your bills on time, do not max out on your credit cards, keep your credit card balances low, keep your debt-to-income ratio at twenty (20) percent. Lastly, do not apply for too many new accounts or loans within a short period of time, especially if you are not certain if your application will be accepted. Frequency of new applications is a factor credit bureaus take into account when generating your credit score and can affect your score adversely.