How to Build a Good Credit History

Building up a good credit history is very important today, since it is used for much more than getting a credit card or a loan. Your credit score will affect not only your ability to purchase a house or a car, but even your job application.

Setting of a good credit history starts with your very first credit card and touches everything you do that involves credit. Late payment or even too frequent credit application can result in marks in your credit report that may encumber your future life for the years to come.

So how to build a good credit history; what are the best ways and how long does it take? Here is a list of the things you should do so that you create a good credit history.

1. Savings and checking accounts setting

   These accounts are seen by lenders as a measurement of your financial viability. It is also a small component that is at the same time of high importance for the building of a good credit history. If you are under the age of 18 some banks will still allow you to open an account. If, however, your bank declines your wish see if you can apply for a joint account with an adult.

   The opening of a checking account will strengthen your creditworthiness. A savings account will do the same job and increase your reliability in the eyes of creditors and lenders.

   However, keep in mind that it is always a sign of a lack of good money management if you write too many checks against your account. So, avoid doing this if you want to build a good credit history. You will be viewed as a high credit risk if you don't follow this advice.

2. "Borrow" someone else's good credit record

   Find someone with a good credit history who is willing to make you a joint user of his/her credit card or co-sign a loan with you. In some cases this will provide you with the opportunity to get loans, which you may otherwise not receive. The responsible paying back of this loan will lead to a positive effect on your credit report.

   However, you should have in mind that the failure to responsibly cover your loan will have a negative effect on your co-signer as well. On the other hand, being an authorized user of someone else's credit card has its negative implications as well. Since this status is immediately transferred to your credit report, an irresponsible credit attitude on the part of the other person will be reflected in your report as well.  

3. Secured credit card selection

   Secured credit cards are the ones that require you to deposit a particular amount of money with the lender, which is used as a limit of your borrowing.  When choosing a secured credit card apply the necessary caution because there are plenty of scams in this field. Some of them charge very high annual fees or outrageous interest rates. Check on your credit union for the available alternatives.

   Look for a credit card that has no application fee and a minimal annual fee. Additionally, the secured credit card you select has to include the ability of transference to a regular credit card after a particular period of time has passed. And, this credit card should be reported to the three major credit bureaus. Otherwise, it will be useless in building a whatsoever credit history and accordingly report.

4. Credit application during college years

   College students are one of the target groups of lenders and creditors, which leads to the many lending opportunities for students while they are in their studies. Many experts advise against such offers, since if not used wisely they may lead to a deep debt of the student. However, college years are the time when it is easiest to obtain a credit. This wide credit choice for students is the result of the lenders willingness to give you credit based on the students' parents readiness to support their children while they are in college.

   When you select a credit card choose the one that has a minimal interest rate and almost non-existent annual fee. Additionally, avoid opening many credit cards over a short period of time because it will decrease your creditworthiness.

5. Installment loan usefulness

   The continuous and responsible use of a credit card will allow you to apply for an installment loan. Using a mix of different credit types is another factor that influences the goodness of your credit score so apply for a small installment loan once you are able to.

   However, try to keep the duration short. This will help you to limit the interest you are liable to while building a good credit history.

The establishment of a good credit history is very important, so you should embark the necessary time and efforts for its achievement.

Additionally, it is recommended that you regularly check your credit report for any discrepancies or errors. You can get a copy of it from the three major credit bureaus, which are Experian, Equifax and Trans Union.

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