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How to Build Credit History

Building and maintaining solid credit history is quite simply one the most important personal investments you can make in your life. Getting started is easy, and you don’t necessarily have to depend on anyone else to begin. It doesn’t matter what age you are, where you live or what your employment history is, having a good credit history can help you buy a home, purchase a new car or simply provide you with the most competitive of insurance rates.

Some might say that not having any credit history is a good thing and that is just simply not true. A bank or credit card company is not inclined to provide a line of credit to an individual that has no history of ever having had made payments that have shown whether or not they are a good risk. If you happen to be a person who has never had credit, the fastest and easiest way to start creating a solid credit history is to open a savings account and start saving money. With as little as $500, you can open a secured credit card, using your savings account as collateral. Use your new credit card by making purchases of up to at least 30% of your credit limit, then when the monthly bill comes, pay the bill in full. If you continue this process on a monthly basis, you will start to build your credit history and you will be begin to understand the two most important factors of credit scoring. How much of your available credit are you using and making your payments on time. These two factors alone are the criteria used to show how you are “scored” and this is the basis of how you “build” your credit history.

It doesn’t matter what you purchase with your new secured credit card. The only thing that does matter is that you only use a portion of the balance. Even if you use the entire balance each month and pay it off each month, you are scored differently than if you just use a portion of the balance. Try to stay within 30% of the entire credit limit, and you are showing that you are a conscientious consumer, and that you are spending within your ability to pay back.

Never make a late payment. In these hard times, it is not enough that you pay the balance in full or that you do not go over your credit limit. You should try to do everything in your power to mail your payment at least ten days before the due date. This also applies if you pay your bills online! Making late payments, even sporadically will show up on your credit report, and it is much easier to start building your credit history by establishing good spending habits, then it is to repair a bad credit history. If you spend within your budget and pay your bills on time, it won’t be long until you are considered a person of good credit standing.

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