What Good Credit Means And How To Build a Credit History
Everyone knows that building a good credit history is important and that your scores can affect you in many ways both good and bad. A higher credit score means lower rates and more money, while a lower credit score means higher rates and possibly being declined for the loan you need. Unfortunately, many people wait until they need money before trying to find out exactly where they stand. This can cause problems for those with less than perfect credit, because there’s no quick fix or way to improve your credit score easily.
A good credit score comes over time and can take months, if not years, to establish a credit history. Even if it’s just a few errors on your report bringing your score down, it can take up to 30 days to get those corrected. This can mean you could be held back from getting the loan you need, simply because you didn’t find out sooner that things needed to be better.
The good news is that for those who don’t have a long credit history or who have a few blemishes, there are several things you can do to help establish good credit. Below you’ll find out how to establish credit and a few ways to build a good credit history, which may raise your scores over time.
Rule Number 1: Pay Your Bills On Time
The best thing you can do to establish a good credit history is to pay your bills on time. Your credit score is partially based on your payment history for things like auto loans, mortgages and credit cards. This means having open accounts that you pay on regularly is very important if you’re interested in boosting your score and building a good credit history.
Rule Number 2: Establish a Good Employment History
On every credit report, there is a section called “identifying information.” In this section, there is a place that notes your employment history. Lenders want to see stability. Having steady employment with a record of salary growth typically indicates that you’re a good prospect. An erratic job and salary history makes you appear more risky to lenders. Employment history is also used as an indicator of your ability to repay a loan. When applying for a mortgage, salary history is one of the most important considerations that lenders will make.
Rule Number 3: Build Up Your Trade lines
As mentioned in rule number one, all creditors will want to see on time, regular payments across a mix of different types of credit. In order to do this, you’ll have to have credit to establish a credit history. This might seem like some sort of gimmick, but it truly helps to build a credit history if you know where to start.
Take Out a Credit Card
If you’ve never had a credit card in your name, applying for one is a quick way to begin establishing your credit history. However, which type of card is right for you? That largely depends on things like your income, your ability to make timely payments, and the card issuer qualifications (what they look for in an applicant). The good news is that there are wide varieties of credit cards available to help you establish a credit history, ranging from unsecured, to secured, as well as retail credit cards. If you would like to use a credit card to build credit, AmONE is a credit card matching service that will provide you with information about the different credit card types available and help you review the various standard credit cards.
Take Out an Installment Loan
This type of credit is different from a charge card because it requires you to repay the money borrowed in set monthly installments. A student loan or auto loan is how most people – particularly younger people just starting out on their own – begin using installment credit. For example, student loans generally have lower interest rates and are easier to obtain. If a student loan doesn’t apply to your situation, many banks and other financial institutions offer small loans for purposes ranging from the purchase of a used car to a vacation. AmONE has free resources available to help you find a small installment loan to help you build a credit history.
Rule Number 4: Consider Being a Co-Signer On a Loan or a Credit Card
Most lenders will allow someone with an established credit history to co-sign on a loan with you. When you co-sign on a card or loan, the lender no longer has to make a decision based solely on your history alone. Because the good standing credit account will report to your credit and your co-signers credit, you can benefit from their on-time payments even if the loan isn’t technically your obligation. Discover how to establish a credit history today!
Rule Number 5: Check Your Credit Report
In the United States, credit reports are maintained by three major reporting agencies: Experian®, Equifax®, and TransUnion®. As a citizen of the United States, you are entitled, by law, to a free copy of your credit report every twelve months from the three major bureaus. You have no excuses for not knowing where you stand and knowing where your finances and credit stand is step one in the process. You can’t fix or build on what you don’t know about, so request your credit report today by visiting www.AnnualCreditReport.com. If you know your score, you can track its movement – and if you can track it, you can fix it if needed.
To find out more information on your credit options or to speak with one of our financial search specialists about building a credit history, improving your credit, monitoring your credit, or protecting your identity, call us toll-free at 1-800-809-1107. You can also complete our easy credit solutions form to be instantly matched with an ideal provider for your needs. AmONE’s services are always free of charge and you are under absolutely no cost or obligation.
