The importance of a strong and favorable credit score in today’s world cannot be overstated. However, for many it is a difficult task to actually begin to establish credit. Many individuals have no idea where or how to start and are oftentimes so frustrated that they just forget about building their credit altogether. Big mistake. Three of the best tips for building a good strong credit profile from the ground up are as follows:
1. First and foremost is to obtain a checking and savings account at a local financial institution such as a bank or credit union. One of the first questions asked on any application for credit is whether or not you have these accounts. This is extremely important and well worth the time they take to set up. All that is typically required is a valid picture ID and proof of residence. Oftentimes credit unions offer the best terms, lowest fees, and very reasonable minimum balance requirements.
2. Obtain a secured credit card from your lending institution. Almost all banks offer these and they are truly a great way to begin to establish your good credit rating. Basically, the bank will set up a separate savings account in which you will deposit as little as $500 to an upwards of several thousand in order to establish you a “secured” line of credit with your institution. You will then receive a credit card with either a Visa or Master Card logo that may be used anywhere these are accepted. The card functions as any traditional credit card and reports to the credit bureaus as such. No where does it indicate that it is secured. Rule of thumb is to spend approximately 20-25 percent of your credit limit per month and pay off the entire balance each and every month on time. This is an optimal formula for increasing your credit score in a quick and timely manner. Not only that, but any balances paid off within the billing cycle forego any monthly finance charges! Once you prove yourself by making payments on time the bank will eventually “un-secure” the card and the funds initially deposited will be released back to you.
3. Last but not least, monitor your credit reports and scores often. Not only does that allow you to know where you stand, but reduces the risk of the ever growing problem of identity theft or someone misusing your credit. There are several companies out there that you can find online that offer a credit monitoring service for as little as ten dollars per month. You can view your current and up to date credit reports and scores at any time by simply logging in to your account. A great free service I have recently found on line is provided by Quizzle.com. Upon establishment of an account you are able to view your entire Experian (one of the three major credit bureaus) credit report and score at any time. Again, this is an entirely free service.