Think establishing good credit is only important for people with actual assets?
Unfortunate oversight. If you ever want to rent an apartment, adjust student loans, apply for any credit card or borrow any money from any bank for any reason whatsoever, bad credit will become a tremendous source of long-term frustration. People will cover their children’s eyes and shoot you suspicious glances when you pass on the street; your friends will scoff when you ask to borrow a cup of flour.
The good news: credit blemishes are cleared from your credit history after seven years. The bad news: seven years is a long time.
Luckily, it’s never too early to start building that history. Just develop a strategy for establishing (or salvaging good credit.
Guidelines for Establishing good credit history
Here are a few ideas for those on a limited budget.
- Try — and try and try — to pay your bills on time. Minimize your payments by choosing credit cards that have low rates and no fees.
- Limit credit-card purchases to emergency situations only.
- Obtain a copy of your credit report once a year to check its accuracy.
- Don’t lend your credit cards to anyone.
- Report a stolen or lost card immediately to avoid any credit history complications.
5 Tips for Salvaging good credit history
If you’re already in credit trouble, don’t dismay. Do adopt the following habits to get yourself back on the right financial track:
1. Don’t pay a credit repair service to “fix” your credit. These expensive organizations inundate credit report agencies with disputes, which, if left unanswered for more than approximately 30 days, allow the bad credit to be stricken from your record, though the blemishes reappear if the original claims are reinstated. TRW (a credit report agency) is currently developing a system to prevent these dispute lapses altogether.
2. Dispute incorrect information on your credit report with the credit reporting agency as soon as possible, though there is no time limit on correcting inaccuracies.
3. Pay off any accounts that show a balance on your credit report.
4. Take a collateralized loan with a bank or credit union and pay it on time every month to help establish or reestablish credit.
5. Open an account with a retail store or gasoline company to again help establish or reestablish your credit. These credit cards are easier to obtain and often have the added security of low limits and balances that must be paid in full every month.