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You should check your
credit profile and credit score every 6-12 months to monitor your credit
building progress. |
Starting off on the right foot can make all the difference when it comes
to building a good credit score for the long term. To build a good score,
you should have an understanding of how the credit system works and what
goes in to a high credit score.
The following steps can help you build a healthy credit history—and
a positive credit score.
Step 1: Know where you stand
Before you decide what you need to do to build your credit history,
it is a good idea to evaluate your current finances. Check your credit
profile to see if you may have an old account or some records in your
name already. If you do not have any credit history, you will see a "thin
file" notification instead of a credit profile online. You should also
check for signs of identity theft on your credit profile. If you find something
suspicious you should report it immediately.
Step 2: Research your options
Most people start to build their credit by opening a department
store card or gas card because they are easier for first time borrowers.
Secured credit cards (that use your savings as collateral for the credit
limit) are also very common. You may also want to see if there are special
offers available to you through your credit union, university or workplace
that may fit your needs. Review each offer carefully for high interest
rates, annual fees and hidden catches. Keep in mind that if you are not
financially stable enough to use credit responsibly, it may be best to
wait until your situation improves before opening an account.
Step 3: Open an account
Once you have picked the best credit card offer for you and decided
that the time is right, submit your application. If you are accepted, your
card will arrive in the mail along with details about your account terms.
Your new account should start to be reported to the credit bureaus in 30-60
days. If you are rejected, you will receive a letter and information about
why you were turned down. Use the information in the denial letter to improve
your finances or find an offer that better fits your needs.
Step 4: Be responsible
Using your new credit card responsibly each month will help you
build a healthy credit score. The best way to build your credit score is
to use your first card for a small monthly bill (such as gasoline) and
pay the balance on time each month. Don't charge more than 35% of your
credit limit to avoid damaging your credit
score. If you follow these healthy financial tactics, it is possible
to achieve a credit score above 650 in 6-12 months.
Step 5: Review and move forward
As you continue to build a healthy credit
profile, your credit score should improve fairly quickly and you'll
start to receive new offers for credit in the mail. When you decide you
want to open another credit account, carefully review the terms before
determining if it is right for you. It's best to keep your first account
open, but if this account charges expensive fees, you may want to close
it after you have opened a second new credit card. You should check your
credit profile and credit score every 6-12 months to monitor your credit
building progress.
Source: Sympatico / MSN Finance Articles, Posted 5/13/2005 |
