Establishing credit can feel like a Catch 22
process. Lenders look at your credit history, contained in your
credit report, in order to judge your credit worthiness. But you
need to have had credit in order to have a credit history. A
good credit history not only makes obtaining credit to purchase
big ticket items easier, but it may have an impact on the job
you get or the apartment that you are able to rent.
Don't be discouraged if you are just starting
out. The fact is that banks want to loan money and to issue
credit cards. A trustworthy borrower is a valuable asset to a
lender. In a nutshell the process of establishing credit is the
process of proving to potential lenders that you are going to be
a trustworthy borrower.
Banks look at several things before they
issue credit to an individual beside their credit report. They
check for income stability, employment history, amount of money
in savings and any land or valuable assets that the potential
borrower owns. The better these things look to the lender, the
more likely they are to offer credit.
Here are the steps to take to establish
Open a checking account.
Lenders expect to be repaid. Most commonly you will do that by
writing a check or using your bank's online bill paying
service. By having a checking account you are telling any
potential lenders that you are ready to pay your bills.
Prepare a budget.
A budget is nothing more than a plan. Where does my money come
from and where does it go? It's your money and a budget puts
you in control of it. Then put your budget into motion, fine
tune it and make it as part of your life
Open a savings account.
Part of any good budget is a plan to save money. Savings
accounts help to cushion emergencies, provide the resources
for irregular purchases and, most importantly, set the means
for your financial goals. Having a savings account tells the
potential lender that you have a sound financial plan.
Look at your Credit Reports.
Check your credit reports for accuracy. Report any errors
immediately. You can purchase an
Equifax 3-in-1 Credit Report for less than $30. This is
before applying for credit and periodically ( at least once
every three to five years ) to insure that you get the credit
that you deserve.
Assess your credit worthiness.
Look at your credit reports. Look at your budget. Do you have
the means to repay a loan? Does having a credit card at this
stage of your life make sense? Be cautious and realistic. Only
apply for credit if you are sure that credit is right for you
at this time
One thing lenders look for is stability. If you have a new job
or have recently moved, wait six months to apply for credit.
If you are due for promotion or a raise, wait till these
things happen before applying for credit.
Consider a secured credit card.
Secured cards are a great
first step for those with little or no credit history. They
have all the functionality and usefulness of their unsecured
cousins and using them responsibly lets potential lenders know
that you are properly prepared for credit.
Apply for a Credit Card
Once you have taken the steps above and feel you are ready,
there are card issuers who work with
customers seeking to establish credit. If you are a
college student looking to establish , we have put a selection
Obtaining credit is a
necessary part of almost everyone's financial plan. Establishing
credit means putting your finances in shape so that any
potential lenders know that you are ready and able to pay your
bills. You should not try to look like you are creditworthy. You
should be creditworthy