Personal Finance

How to establish your credit

Credit cards are part of life nowadays, and you will always need one to make a hotel or plane reservation, or to rent a car or rent a video, even if you plan to pay cash. Many stores require a credit card to accept your check; however, people who have never had credit, they cannot get a credit card. So you need credit to build credit.

How would you establish credit when you need one?

Establishing requires responsibility, and you must get your priority in order. Credit is a credit history report of borrowing and paying characteristics of individual’s spending habits. There are many ways to establish your credit:

  1. You can establish credit by using your bank account as collateral and get a credit card from your bank. You use the credit card to spend on your everyday needs. Nowadays, you can use your credit card to buy gas, grocery, auto repair and etc. Next, you pay off your total balance every month so that you won’t have to pay the interest rate. You have option for credit from different credit lending institutions, bank, credit union, department stores, and etc. to fund your credit needs and requirements.
  2. You establish credit by financing your purchase such as buying an appliance, buy a vehicle and even get your first cellular phone. You will need to put some money for down payment. Make sure that you make your payments on time. It depends on the company, which does the financing. Some companies will report your payment history to the credit bureaus. And some other companies don’t report your payment history to the credit bureaus, and usually they will give you history of your payment with notarization on it. It is your responsibility to send a copy of your payment history to each of the credit bureaus. Send your letter by certified mail, “return receipt requested,” so you can document what the Credit Bureau received.
  3. You can also establish your credit through secured credit card. A secured credit card requires a cash collateral deposit that becomes the credit line for your account. For example, if you put $500 in the account; you can charge up to $500. You may be able to add to the deposit to add more credit, and sometimes a bank will reward you for good payment then add to your credit line without requesting additional deposits.

Responsible use of a credit card and keep your payment on time will build a good credit rating history, and within two years you will be able to qualify for a regular credit card. Just within four years you will have mortgage-worthy credit history.

Not portability

Credit history is not portable; if you live in one country your credit history will stay in that country. When you move to another country, your credit history will not follow you to your new country. For example, you live in United States of America and your company decides to move you to manage a branch in one of the country in Europe or Asia. You will have to establish a new credit history in your new country.

Credit is the necessity instrument for personal and business financial transaction in America. And it may be also part of financial transaction in other countries in the world.

Who usually need credit?

Most people from the middle-class income group opt to establish credit to get loans for funding their living requirements and as well as present needs, the reason being that the people of the middle income group usually can’t afford to spend a lot of money together. Thus, they opt for credit loans to satisfy their financial needs. However, with the advent of time the availability of credit in the market, too, has seen a recent rise along with the demand of credit in the market.

There are many ways credit available in the market place, as to how an individual can raise credit for his individual purpose. People can raise credit from the market to meet up their present demands; they can raise credit to meet the demand of their collectors; they can raise credit for any reason that they want from the market, depending upon the situation and demand of funds by the borrower.

However, problem arises when the borrowers are refused credit in the market by the lenders. The reason can be anything. Sometimes an individual has never taken any credit at all, or because he or she has a bad credit history, so he or she will not get any credit. Therefore, if any person does not have any credit history and wants to build credit, he or she should have all the priorities in order, or he may not be able to build any credit.

In case the borrower has no credit and needs money to make out or sort out any payments then he can be a financial strain, if he or she has bad credit or no credit. Establish credit using credit card is very important, if any person has to make out any payment and has no cash available with him, and then he can make the payment from his credit card. This avails him with some time; for instance, he can make the payment in monthly installments, to the credit service providers. Responsible spending, in due time, then it avails him the luxury of better credit, which can lead to increase spending power in time to come.

About the author
Johnny Saing is a Webmaster who has witnessed first hand the effects of credit report errors when he checked his own credit report. He is the publisher of A website that provides articles on credit report: where to get your information on free credit report, disputing credit report errors, improve credit score and etc.