If you asked most people how their credit score came to be, they would likely return a blank stare. Even, surprisingly, people with excellent credit. Often, people who have good credit ended up there via a course of opening all of the normal accounts, making regular, ontime payments, and as a result, ending up with a good credit score with as much luck included as planning, and frequently more so. For a person just starting off, or for the person trying to repair their credit score after their credit has taken a beating, there is a faster, more effective way of going about the process of repairing your credit score on purpose.
One of best places to start is using secured loans. The idea here is simple: Your credit union or bank keeps your money in an account, and in turn loans the same amount of money to you. As you start making loan payments, your money will be released back to you until the loan is paid off. Huge win number one of this technique: Banks and credit unions hardle ever check your credit for these type of loans because there is no risk to them for lending you the money. The second huge win: As you make payments, they are almost always reported to the credit bureaus, which means you start establishing good credit as soon as you make your first payment. The third huge win: You aren't as likely to endure the sky high fees and interest rates that you most likely with the credit cards and lenders that approve people with little or no credit. Starting where you have your savings or checking account is usually best, as you already have an established account history with them and they will almost always allow you to start automatic payments.
Next, move onto small credit cards. It may take you some shopping to find the right card at first, and be very careful of the terms they offer. If they expect you to pay a significant monthly or yearly fee for the card, keep looking around. Use them sparingly, and pay them off at the end of each month to avoid paying interest.
It never hurts to, from time to time, shop around to see whether or not you can get better rates and terms on your credit cards. Your first cards and secured loans will, over time, Work to raise your credit score more and more as time goes on. But this doesn't mean you should stick with them forever. It pays to shop around every 6 months or so to make sure you have the best interest rates and terms on your credit cards. Your goal is to eventually have a couple of cards with very good terms, and then, anticipate keeping them around, as the your credit rating will continue to improve the longer you have accounts open and in good standing. As well, try as hard as you can to make sure your balances are low compared to the limit on your card. A maxed out credit card can bring your credit score down in a hurry.
After you have made on time payments for a while on the accounts described above, you will have much greater chances to begin qualifying for automobile loans or even home loans. Keep track of your credit score throughout the year so you will constantly be aware of where your credit stands.
So whether you're working to rebuild your credit after you've survived a financial disaster, or struggling to establish your credit for the very first time, you can use these simple steps to get your start in the credit world.
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This feature has been abridged to fit the configuration of this website. For the complete, original article, including additional supporting information and resources, please click this link --> How to Build Credit on Purpose . Behind the scene secrets from the the professionals that work with credit everyday are available at Credit Education: Guides and Workbooks .
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