Whether you are new to credit or are trying to “clean up” past issues to reestablish a favorable record, you may encounter a frustrating paradox: many financial institutions are reluctant to extend credit to someone without an established record. Yet the only way to build a credit record is to have and use credit. Here are some ideas on how to create and build your credit history.
A CERTIFICATE SECURED CREDITLINE
An excellent place to start is with a certificate secured CreditLine. You are granted a CreditLine based on the balance ($1,000 minimum) in a term certificate. By borrowing and repaying your loan on time, you demonstrate fiscal responsibility and establish good credit history.
A CO-SIGNED LOAN
Another option is having someone with a positive credit record co-sign a loan for you. This requires a great deal of trust on the part of the co-signer – if you fail to pay, he or she is responsible for the loan. Before seeking this option, consider the implications of asking others to co-sign for you. Make sure you take into account the potential impact on your relationship and on both your credit and the co-signer’s credit if you fall behind on payments.
A SAVINGS SECURED LOAN
If you haven’t saved enough for a certificate secured CreditLine, a savings account with at least $500 may be used for a savings secured loan. This is a great option for individuals with a savings account who wish to start establishing credit history. A co-signer or credit history is not needed and the funds continue to earn dividends.
PAY OFF YOUR DEBTS
Once you have a CreditLine, establish a good history by using it responsibly. Keep balances low, always pay on time, and develop positive habits when using your card and checks.
REVIEW YOUR CREDIT REPORT
Finally, if you have credit history and want to improve it, you might need to rectify the past as you’re building your future. Start by paying old debts and correcting errors on your credit report as soon as possible. You may request a free copy of your credit report from each of the three nationwide agencies every 12 months through annualcreditreport.com.
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