How to Establish Your Credit

Credit CrunchBuilding up your credit is very important. If you learn how to do it from the start then you will be better off credit wise than establishing credit without understanding the ramifications of different credit sources.

How to Establish Your Credit Score

By William M Drapcho

A higher credit rating is essential for you to be approved for any type of major loan such as an installment load for a car, or a home loan. If your credit rating is lower, you may find it next to impossible to get approved. Therefore, if you want to start gaining a good credit rating, you’ll want to start applying for credit as soon as you can. But there are so many pitfalls along the way that can trip you up. Keeping your nose clean is important for what you hope to accomplish for your credit future.

If you are young, or just don’t have any credit yet, you’ll want to at least try to open one credit card to establish credit. Try to open a major credit card or a department store card. Try not to apply for many at once, and make sure you only open one or two at most in the beginning. You’ll also want to make sure that you use them wisely. Don’t go crazy and spend up to the limits on the cards making it difficult to pay off. The purpose is to start establishing good credit. Your credit limits may be low in the beginning, but they will go up if you abide by the creditors terms. Also understand that your interest rates will generally be higher on a department store card, versus a major credit card.

There are certain ways to control your payment history to your benefit. As always, you want to try to pay in full each month. If you can’t pay in full try to pay more than the minimum balance, but at least make sure you pay your minimum by the due date each month. Failing to make your payment on time could cost you points on your credit score. Keep in mind that all creditors now let you pay online as well as set up direct withdraw for your payments.

Don’t keep your card with a balance over 25% of the available credit. But if you must, the lower your debt to credit ratio the more it helps your credit score. For instance, if you have one or several cards that equal a $4000 credit line, and you have a balance of $3000 then you are at a 75% debt to credit ration on that card, which is very high. However, if you have a balance of only $1000, your debt to credit ratio is only 25%, which is much better.

Credit score ratings are usually between 350 and 800. The lower your score the more difficult it will be to keep getting credit. The ideal range is between 650 and 800. To reach these numbers, remember to keep your payments on time, and your debt to credit ratio very low. Limit the number of cards you have. It’s ok to have a few cards, but try not to go over three cards at a time. If you have 15 credit cards with a large available credit, you can look like a bigger risk to lenders. Just be smart and responsible and within time, you will be able to qualify for the car or home you dreamed about.

Will Drapcho has authored many articles regarding online marketing to help networkers build their business faster. Feel free to visit him also at http://TopMLMBuilder.com

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