Everyone needs to establish good credit because it's a necessary part of every day life.
Whether someone is renting an apartment, buying or leasing a car, or getting a cell phone, having credit in your name is part of the approval process. Here are some suggestions from a Consumer Credit Counseling Service.
Open a bank account:
Even though this will not appear on your credit report, bank numbers are often requested on credit applications.
Apply For a Credit Card:
To avoid being denied credit, apply for only those cards whose requirements you are likely to meet. Department store cards or gas cards are usually easier to obtain than bank-issued cards with a Visa or Mastercard logo because the balances do not generally revolve.
Before applying, make sure the creditor reports account activity to the credit bureaus. As the purpose to obtaining this card is to establish credit, you want to choose a card that will help you do this. If you want a credit card with a Visa or Mastercard, ask at the bank or credit union you belong to.
Charge purchases and make payments on time:
Use your credit card for purchases and make sure to pay the balance on time. Once you have used the card responsibly for three months, you may then want to apply for a Visa, Mastercard, Discover or American Express. These will allow you more flexibility in charging purchases, but will also give you more opportunity to get in to credit trouble.
Create a spending plan:
Before you use you credit card, you will want to make sure you can pay the balance off every month before you make a purchase. Write down all your expenses and your income and adjust your spending accordingly. Remember you intentions are to establish good credit, so if you charge too much and can't pay it off every month, it will not help you in the long run.
A secured card is an option:
If you have trouble qualifying for a credit card, you may opt to apply for a secured card. These cards have credit limits based on a required deposit made by you into a savings account. You use the card though just like you would any other credit card.
If denied credit, ask why:
Ask any creditor that denies you credit to give you the reasons you were denied. It is important to find out why you are denied because frequent inquiries (applying for credit) on your credit report can be viewed as a negative to a potential creditor. If you are denied credit, you can request a free copy of your credit report to see if there is erroneous data on it. That way you can have corrections made.
Don'd overdraw your bank account:
You will be charged fees and you could damage a good reference.
Avoid missed or late payments to any creditor:
This is a sure way to damage your credit rating.
Don't let anyone else borrow your credit card, debit card or in any way have access to your bank account:
You are responsible for any authorized use of your accounts.
Avoid cash advances at all costs:
They are expensive. You pay an upfront fee of 2-4% on the amount you withdraw and you will be stuck paying a high interest rate, often in the high teens or higher. And because their is no grace period on a cash advance, the interest charges will begin to mount as soon as the money comes out of the ATM.
DO NOT give your credit card to anyone over the phone or internet unless you were the one that initiated the transaction.
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