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Establish but also MAINTAIN Credit!Aug 03 '00 Write an essay on this topic.The first step toward establishing credit is by opening a checking or savings account. You may also be able to get a credit card from that same bank which will often give you a break on interest rates or annual fees. Most credit applications are scored by computer, based on the issuer's guidelines for weighing such factors as length of employment, income, amount of credit available, and past payment history. Some issuers set strict standards, others are willing to consider high-risk accounts. Secured credit cards may be the only choice for people with no credit history or those who are trying to reestablish themselves after past credit problems. With a secure card, you leave an offsetting balance equal to your credit line on deposit at the bank, but you will earn some interest income on it, and the interest rate on the card may be lower than it would be otherwise. Because you have to deposit cash equal to what you might charge, you are less likely to think of a credit card as free money and you know you will always be able to pay the bill. WARNING: There are organizations that are not fully legitimate that offer secured cards. Try to deal only with banks or other known credit grantors. If you cannot get a bank card, department store cards and gasoline credit cards may be easier to come by. If you pay your bills on time, you can begin to establish a credit history. Just do NOT carry big unpaid balances on these cards - interest rates can be extremely high! Avoid seeking help from family and friends for loans, even if you are just starting out. It is a mistake to have a co-signer on your loans when you are trying to establish a credit history. The loan would be based on the co-signer's income, and the record would not reflect your ability to make the payments. If you cannot obtain credit with any of the above suggestions, you might consider asking to be listed on someone else's account as an additional card holder and paying the bills for the charges you incur. Make sure that the credit reporting agencies know that you are responsible for the payments. Once you have established your credit, limit your total debt to 15% or so of your gross income, excluding your home mortgage. Do not let available credit - the amount you are able to borrow or charge on credit cards, exceed 30-40% of your income. Now that you have a credit history, you will also have a credit record. Information is provided to credit bureaus such as Equifax (1-800-685-1111), Experian (1-800-682-7652) and Trans Union (look in phone book for a local number). You should request a copy of your credit file every few years to make sure that it is correct. These reports usually have a fee but you can get a free copy if you have been denied credit within the past 60 days. What is reported on your credit record? Creditors generally report whether accounts are current, 30, 60 or 90 or more days late. Any payment 30 days late can be reported as a delinquency. Delinquencies and other bad debts remain on your file for seven years. Other data that is recorded on your credit history includes bankruptcies, foreclosures, legal judgments, and tax liens. Depending on your state, delinquent child-support payments may also show on your credit history.  |
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