Good Credit: How Do You Establish It?

by : Tom Ambrozewicz

At some point in everyone's life, it is required to advance from having no credit to building good credit in order to secure your financial future. Whether you are trying to rent your first apartment or applying for a loan to make a large purchase, you will need to have a good credit history to your name so that the person you are working with knows that you are a reliable and trust-worthy investment. Unfortunately, most people do not know how to establish credit.

Bad credit is much more serious than most people understand. You could be denied loans and have trouble with various other financial institutions because you will be immediately labeled as a "risk." Identity theft has become a recently common reason for false negative credit to your name. It is an unfortunate circumstance, but don't think anyone will go easy on you. If you put it into perspective, you wouldn't loan money to a friend who has been slow to repay others in the past. Unreliability will be the first thing that people notice, not the excuses, no matter how good they are.

The key is to be knowledgeable of safe ways to build credit without risking the mistakes that will inevitably result in a bad credit history. For instance, your parents could put one of their monthly household bills in your name while you are still in high school. If this bill is always paid on time, you will gain good credit. However, it is vital to understand that if they miss any payments, it could get you started on the wrong foot.

Stability is another factor that plays into your worth to creditors. Keeping the same job for 2 years or longer and having a stable checking or savings accounts with a bank are a perfect example of having a stable cash flow and responsibility with finances. Making deposits and keeping your balance at a positive number with a bank account and having a steady income show that you are less of a risk to miss payments or leave town to avoid facing collectors. Your address, bank, positive bill payment history, and employment information can be added to your credit report at your request if it is not already present.

Credit is an important part of everyone's adult life. Good credit will assist you in being accepted for automobile, home, and personal loans. If your credit score is bad, you will often be rejected for loans because you will be labeled as a risk and it is assumed that you may not be willing or able to reimburse the loan. Building good credit early can be an easy head start in the right direction for your financial future.