Credit is all important to this day and age, whether you are just out of high school, or in your retirement years, you can always build your credit up. Regardless of age, it is important to have a good credit score, and will help you in getting credit cards with low interest rates, to buying a new home, or other purchases.
To begin with, if you do not already do this, make a budget, of your current net income, and outgoing expenses. Be informed on how to cut cost on everything, and begin saving as much as you possibly can. Only after you have yourself in a set and workable budget can you even begin to consider getting credit.
Next off you should go to a free credit reporting agency such as Equifax, to see your current credit score, this is important even if you had no credit before, as this will give you an idea of where you stand in the eye’s of the credit industry, and more importantly, will tell you if there our some outstanding debts that you didn’t know about, or that may not even belong to you. If there is a discrepancy file all paperwork and forms with the alleged creditor (the person that say’s you owe them.) to clear it up, as soon as possible.
Next you will want to open a checking and savings account, or if you already have one keep it balanced and do not let any checks bounce, and keep as much in your savings as possible. Begin putting at least 10% of your weekly income into your savings account on top of what you already put in for the next two years. Use the 10% then to take out a certificate of deposit or C.D.
A C.D. is a loan you make to the bank, in which you promise to keep a certain amount in the loan, for the bank to pay out to others, the agreement can be for 6 months to twenty years, and they pay you interest that is compounded daily, weekly, monthly or even yearly, of which is higher then you would receive in a savings account. Agree to a C.D. that can be used to get a secure credit card. The C.D. will be used as good faith collateral, and can fit any budget, as they range from $2,500 to in the millions.
Keep up on paying the credit card balance and in time you will be offered unsecured credit cards of higher balances and lower interest rates. My personal rule is to not go over half of the spending limit, for example if you have a $2000 dollar limit, never go over $1000.
Always mix your debt up, that means apply for department store and gasoline cards, as well as bank cards. Keep up on payments on these and it will show you can handle diverse credit debt. Always check your credit score every two years at least, and before applying for a car loan or home loan. This is to make sure you have no surprises and you can remedy the situation before going through all of the paperwork etc. only to be turned down.
Keep up on all your bills be it rent, utilities and even hospital bills, and keep them paid up, if it is a large bill, see to it you make monthly payments, as agreed upon between you and the person you owe, so as to not get it reported on your credit.
There is no short cut to credit, it will take time, diligence and financial planning, but this hard work and dedication will pay for itself when you have your choosing of low interest credit cards and are able to get loans for homes and cars that are substantially cheaper then if you had only average credit.
Helpful tips.
1. Keep rolling over your C.D. and let the interest compound for years, this can serve as your starting point to a retirement nest egg, or to be used later to start a business or invest in property. Never take the C.D. out early, as you will lose all your earned interest and possibly your starting investment. Not to mention losing faith in the eye’s of the bank.
2. Consider having a family member with established credit co-sign a loan, this will help speed up the credit building process.
3. Keep to your budget at all times, as this is paramount to ensuring you can pay off your debts.
4. Have a clear goal in mind of what you wish to do as you build credit, be it to buy a house, start a business or buy a car.
5. Rent to own stores, while gouging you on prices in the long run, are another good way to diversify your debt, and almost anyone can get approval, this will help you in establishing yourself when you have little or troublesome credit.
6. When getting any loan, get the disability and life insurance on it, this is seldom offered, so ask for it. This will cost more, but is well worth it for peace of mind. If injured or sick it will pay your deductible or in some cases make the whole payment, and your family will not be saddled with any liens against your estate, should you pass on.
7. Know that saving is just as important as good credit, and look at investing 10% of your weekly income.
This is affordable to anyone, as it could be as simple as government issued or municipal bonds, or increasing your C.D. size.
8. Fight any discrepancy tooth and nail, if you find it on your credit check.
9. Make agreements to any creditors to pay any outstanding debt no matter how long ago.. It would be a shame that you would have to suffer from a hospital bill from years ago, or a phone bill from your younger years, as you try to start a family, or buy a car.
10. Get extra insurance for disability, or hospital care , this will help you hedge against unforeseen life events, and help you to stay on track without losing what you worked so hard to achieve.
Always remember that your credit history will follow you your whole life, so make it a good history.