Slow and Steady I am sure that many of us, as we have attempted to purchase assets and things not so asset-like, have had to fill out that little form affectionately known as a credit application. Many times, they are shoved under our noses as we just about to check out of a department store. Often we are told, just as we decide on a living room suite, that we are entitled to purchase it with, “No Interest! No Payments ‘Till March 2010!” The truth of the matter is, we should have all been schooled in the area of credit and how it works before we ever filled out that first application.
It’s a good idea to start building your credit slowly but surely. Building credit is like letting a pot of gumbo slow-cook over a fire. The taste will be long-lasting and you’ll appreciate it for a long time. If you are looking to establish credit for the first time or even looking to rebuild your credit, you could begin by visiting your local credit union or bank and telling them that you would like to establish credit by taking out an unsecured loan for a relatively small amount.
If the bank won’t allow you to open an unsecured loan, then ask them for a secured loan. The difference between the two is that a secured loan allows you to borrow against the amount that you have already saved at that moment. The foundational basis for establishing credit is proving to people that you pay your bills on time and that you are trustworthy.
Mix It Up A Bit
It is also important that while establishing credit that you diversify the type of credit that you establish as well. For example if creditors see that all of your credit is considered revolving credit, it may work against you, and even result in a lower credit score. Even if you have the money to purchase a vehicle, you may want to consider a little strategy. Leave off about $1000 and take out an auto loan. Auto loans are considered installment loans and it helps to have this in your credit mix. The small amout of interest you pay in one year is worth the bump you will notice in your credit score from having this in your credit history.
You will also want to include store credit when you are looking to establish your credit. It would serve you well to utilize that store credit card occasionally (about 3-4 times per year). The one thing to watch out for is not allowing balances to remain on these cards for too long because the interest rates on these cards are usually pretty high. If you are able to exert a certain level of self-control, then feel free to use the card even more. Many times there are store promotions, rebates, and discounts at certain times of the year that are associated with that particular card.
Establishing good credit will ultimately reduce the costs involved to borrow money. This could result in savings on tens of thousands of dollars over a person’s adult life. And hey, isn’t it better to have that amount of money in your pocket than theirs?