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When lenders, insurers and other financial services providers want to make decisions about you, they check your credit history. If you want the best rates on your loans, the best deals on insurance, and, in some cases, access to the best jobs, your credit history needs to reflect the best of you.
Building good credit takes a little time, but it doesn’t have to be hard. Here are the steps to building credit the easy way.
Open a Credit Card Account
One of the fastest ways to establish your credit is with the help of a credit card; a credit card is also one of the easiest types of credit to receive approval for. Credit card issuers report your payment history to the credit bureaus monthly. This means that you have the chance, every single month, to provide a piece of positive information for your credit report. Open a credit card with a major bank for maximum effectiveness.
Use Your Credit Card
In order to build credit history, you need to have a record of your credit usage. This means you have to use your credit card. If you aren’t comfortable using your credit card for a large number of purchases, just choose between two and five things each month to buy with your credit card. Make sure they are items you can afford, and that you already plan on buying.
Make Payments on Time
Now that you have used your credit card, you want to make sure that you show your good habits by paying what you owe. You need to pay on time, so plan ahead to schedule payments online, or to send the check in. You should pay at least the minimum in order to get good points for credit. You’ll be better off financially if you pay the entire balance with each bill. That way you won’t pay any interest on your purchases.
Get an Installment Loan
Once you have a few months of credit card use under your belt, get a small installment loan. This can be a car loan, or even a personal loan from your bank. It doesn’t have to be for a huge amount, either. Make regular payments on that loan, discharging it fairly quickly, and you will show some diversity in terms of types of credit that you have, and that will help build your positive credit history as well.
The basic rule of building credit is to use credit responsibly, buying only what you can afford, and then to make payments on time. If you follow that rule, you’re likely to build credit easily, and do it in a surprisingly short amount of time.
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