Start Your Credit History On The Right Foot

In order to start credit history, the requirements are usually very minimal. However, how you use credit can have a huge impact on your future.

Importance of Credit History

In the past, credit history was only used by banks and other lenders who were considering granting credit to individuals who were applying for credit cards, home loans and auto loans. In most cases, lenders used a credit score, credit history and income as determining factors in deciding whether or not to grant credit.

However, today credit history and credit scores are used on a far wider scope to determine life events. For example, many employers now regularly review credit reports as part of the interviewing and background review process. Other organizations that often use credit reports and history include insurance companies, landlords and utility companies, just to name a few. As a result of this broader use of credit history, it has become extremely important to create positive credit history from the very beginning.

Check Your Credit Report

Even if you have not consciously made an effort to start your credit history, you may be surprised to discover that there will probably be something on a credit report. You are entitled to one free credit report every year. If you are denied employment or credit because of information that is provided on a credit report, you are also entitled a free credit report.

You can order a copy of your credit history from Experian, Equifax or TransUnion online. When you receive it, carefully review it to make sure that everything reported is accurate. Surprisingly, most credit reports have errors on them and it is up to the consumer to challenge anything that is reported in error or incorrectly.

This can be when you discover that someone has been using your identity illegally to gain credit. If you discover this to be the case, make a police report and then begin the process of cleaning your credit by challenging any information that is the result of identity theft by writing the credit reporting agency and providing a copy of the police report.

Applying for Credit

Usually it is possible to apply for and be granted an entry level line of credit from a credit card company with very little or no credit. There are many companies that specialize in providing credit for students or for young adults who are just starting their credit history. Very often, these companies do not require extensive income or rental history.

Using Credit

Once you are granted a line of credit, then it is vitally important to use it wisely. This means not exceeding the credit limit and making payments when they are due. When possible, make payments of more than the minimum required monthly amount. This will not only reduce your balance much more quickly, but will also demonstrate your credit worthiness. Over time, with good use of credit, the line will gradually be increased to improve your purchasing power.

Summary

Credit history is used for far more than credit today and using credit wisely and responsibly can make a gigantic different in your future. Begin establishing credit history by first looking at your credit report, then by applying for credit and making payments when they are due and not going over your credit limit.


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