How To Establish Good Credit

If you are just starting out on life as an adult then it isn’t going to take you very long before you realize that you are probably going to need credit sometime in the future whether it is to buy a reliable care to get to and from work or that home when you eventually start a family.  Ironically to get those things on credit you need to have all established a good credit rating.  Here are some ways to establish that good credit and keep that credit score healthy so that when you need those big ticket items, getting those loans will be easier.

  1. Get established in your job and hold it for a significant length of time.  In order to get even the small amounts of credit you will need to establish a good credit rating you are going to have to show that you are capable of paying your bills and to do that you are going to need to have a job and show that you are responsible.  The longer you have a job in the same place, the more reliable you will appear.
  2. Pay your rent and Utilities on time.  It is surprising how many young people don’t realize how even being a couple of days late can adversely affect their credit scores before they even begin to establish any other type of credit.  Late payments on rent and utilities do show up on those credit reports and while they may not prevent you from getting a small personal loan they can ruin your chances of getting that loan for a big ticket item down the road.
  3. Start a Savings account.  Having some money in savings may not do much to affect that credit report but, it does show that you are capable of handling money and gives you a buffer once you begin establishing credit in case something happens that you have difficulty making a credit car or loan payment.
  4. Get a credit and a debit card.  Your credit card should only be used sparingly and only as a means of establishing credit.  Too many people get over their head in credit card debt and ruin their credit for years to come.  By using that credit card only once or twice for small purchases and paying off the card in full when it comes due, you are establishing excellent credit, without the worry of getting in over your head.  For all other purchases a debit card works well as you can only spend the amount of money that is on the card.
  5. Take out small instalment loans and make payments promptly.  Many banks want to see both credit card payments and loans payments on those credit reports.  When taking out a personal instalment loan take out a small loan (even if you don’t really need it.) and make your monthly payments on time.  If possible pay off the loan slightly ahead of schedule.  If possible try and get two or three of these small loans over the next 5 years and each time pay them off on time or ahead of schedule as this will show that you are both able to make payments and that you are responsible enough and handle money well enough to pay the loans off according to the terms.

By thinking things through and slowly and smartly building your credit history, you will be leaving yourself in the idea position to get that much bigger loan when and if the need arises.