Unfortunately for those just starting out, having no credit score at all can be just as detrimental as having a bad credit score. This makes the act of building good credit a challenge. In order to build good credit, one must first be able to procure initial credit on which to build. Once the initial credit foundation is established, building a good credit score presents much less of a challenge.
Things You Will Needa steady income stream that will allow you to pay off debt you accrue.
Step 1If you are student, apply for a student credit card to help build good credit. Student credit cards are geared toward helping young adults build credit and many do not require evidence of a previous credit history from the applicant in order to ensure approval. Be sure to shop around for the best interest rates and terms before choosing to apply for a student credit card.
Step 2Consider taking out a bank loan. Bank loans are a different type of debt than credit card debt and thus they will help you build a more well-rounded credit profile. Getting a bank loan with no credit is difficult, but certainly not impossible. Dress professionally and make an appointment to speak with the bank manager. Explain to him or her that you are interested in building good credit to provide for your future. Ask what steps you should take in order to become approved for a bank loan. Bank managers have the ability to override bank conditions on loans and can approve you without a credit score.
Step 3Use your assets to qualify for a bank loan. If you have money in a savings account, you can borrow against that money without having a credit score to back you up. The process works like this: the bank will "freeze" your assets, grant you a loan in an amount less than or equal to the amount in your savings accout, you pay off the loan, and your assets are once again released to you. It is best to pay off the loan in installments to demonstrate an ability to pay over time.
Step 4Get a cosigner. If your parents or grandparents have good credit and want to help you establish your own good credit profile, they may be willing to cosign with you for a loan. The loan is granted to you based upon the credit worthiness of your cosigner, but you are the one whose credit report is granted the trade line from the loan. Remember to always pay off the loan on time. If you do not pay your loan payments on time not only will your new credit score suffer, but your cosigner's credit score will suffer as well.
Step 5Remember your student loans are also considered debt. If you have student loans, once you begin repayment of those loans you will be building good credit.
Step 6Apply for a regular credit card. Once you have established your base credit trade line, you can begin applying for standard credit. It is important to have at least one credit card in order to have revolving debt on your credit report. Remember to keep the balance on your credit card low in order to accrue the most credit points possible every month.
Step 7Monitor your credit report. Every year you are entitled to receive a free copy of your credit report. Always get yours. The Credit Reporting Agencies have millions of credit profiles to manage and mistakes happen frequently. You cannot afford to let the new good credit score you build be damaged by the mistakes of another. Your credit reports should also be regularly monitored in order to help you identify potential identify theft.
The most important aspect of building a good credit score is to be responsible in the process. Although the more varied your debts are the most rapidly your score will be established, remember to never take on more debt than you can comfortably handle. Monitor your credit reports regularly and continue to pay off and build a debt profile and you will have built a good credit score in only a few months as opposed to the years most people take to truly diversify and build up their credit profiles.