Building Credit History
Building credit history can be one of life’s catch 22’s – You need credit history to get credit, but you won’t be able to get credit without a credit history…
So how do you build good credit?
It takes time to build good credit. Although you may have a credit history and possibly even a score after 6 months, it probably wouldn’t be sufficient. You need at least 24 months of consistent, on time payment history to get a good score, or to improve your score if you already had one.
Why is that? Because credit scores are 90% based on the last 24-months of activity, and when you’re trying to build GOOD credit the burden of proof is on you. You need to convince that you are reliable, trustworthy and can handle your financial matters responsively. That takes time, and there are no shortcuts.
Why start building credit?
It takes time, energy and may even cost you some money to establish a good credit history and a reasonable credit score. So should you bother?
This is a question I get to hear too often. “I’ll deal with it when I need it” or “I have no intention of buying a house anyway” is often the next sentence that goes along.
Here are several reasons why you should start to build up credit even if you’re not looking into buying a house right now.
So how one starts building credit history?
The most common ways to establish credit are loans and credit card. Of courses that securing a loan or a credit card without having prior credit history is very difficult to say the least, but there are ways to overcome this obstacle:
Establishing credit history with credit cards explains all your option and credit card types that can do the trick for you.
How to build credit history with secured loans explains all your options to build up credit with these types of loans.
Credit Piggybacking is the best way to build credit, repair credit history or fix credit score. Kid can benefit from their parents good credit, as well as parents and spouse.
How to build your credit – Important Do’s and Don’ts supplies important tips for boosting up your score and building good credit.
Anything else of importance?
First – remember that building a credit history means you need to create a recorded payment history.
Not all credit card companies, banks or financial institutions report to all 3 major credit bureaus. In fact, some do not make reports to any.
You may be making on-time payments for 10 years, but if your creditor reports only to, say Experian, then this means that as far as Equifax or TransUnion goes – you have no credit history at all.
When building credit history, you need to make sure that you build it with not just one, but all 3 credit bureaus. When you apply for a credit card or a loan, there’s no point in doing so unless they report to all three credit bureaus.
Second and most important – NEVER be late on a payment. NEVER!
Seriously – I can’t emphasize it enough. Being late on even one payment will harm your credit much more than what 2 years of on-time payments can repair.
Lastly – Be patient. You can and will have a credit score after about 6 months, but it will be fair at most, probably 6xx. If you aim for a major league’s 7xx credit score (and you should) – you need at least 24 months of consistent on time payment history. You also need to use different types of credit – loans, at least two credit cards and probably a big Kahuna’s credit card as well.