Establishing Credit

You know that establishing and maintaining a solid credit rating is vital to your future financial success. The challenging thing about credit, though, is that it often seems impossible to get credit unless you've already established good credit.

For young people who want to start on the right foot, beginning from scratch with no credit history can seem like an impossible task. But with the right strategies and responsible use of the tools available to you, you can establish solid credit in the early years of your adult life.

Use these strategies to get yourself off on the right foot and establish a solid credit rating, right off the bat:

1.     Check your credit report. To know where you're going, it's important to first assess where you are. When you're first starting out, your credit file is probably sparse. However, with identity theft on the rise and other credit dangers lurking, it's important to check your credit first to make sure you are indeed starting from scratch.

·       It's also important to check your credit file as often as possible. Federal law allows you to obtain a free copy of your credit report from each of the three major credit reporting bureaus once per year.

·       To continuously monitor your credit throughout the year, stagger your requests for these reports. That way, you'll quickly be alerted if something improper has been added to your credit file. Instead of requesting all reports at once, request one from a different bureau every four months.

2.    Pay your bills on time every month. One of the most important factors that influences your credit score is your history of paying your bills on time. When you pay your bills by the due date every month, in the eyes of creditors, you're living within your means.

3.     Get a recurring bill in your name. Often, students will have regular monthly bills listed in a parent's name. However, if you get a cell phone bill or other monthly recurring bill in your name and pay it in full every month, you'll establish yourself as a person who's responsible in handling financial matters.

4.     Have someone you know put in a good name for you. You can use someone else's good credit to establish your own solid reputation. You can do this by having that person cosign a loan for you or by becoming an authorized user on that person's credit cards.

5.     Get a student credit card. Often, college students can get credit cards more easily than others can. In fact, on many college campuses, you can find booths at student events that promote credit card sign-ups with cash prizes or other incentives.

6.     Use these cards sparingly but regularly. If you're obtaining credit cards mainly to increase your credit rating, you need to use the cards to experience the boost in your score. Make small monthly purchases with the cards and pay the balance in full each month.

·       Remember, though, that a credit card is not cash. Borrowing from a credit card means agreeing to pay much more than the purchase price if you don't pay it back on time. Avoid credit bondage. Be smart and make only small purchases that you can cover in full when the bill comes due each month.

7.     Set up a monthly budget. One of the most important factors in maintaining a solid credit rating for life is a lifestyle of wise financial decisions. When you list all your income and expenses, you know the financial resources you have available to you. When you do, you're less likely to get yourself into a credit bind.

Setting yourself up on solid financial footing early on in life sets the stage for a lifetime of fulfillment. Misuse of credit, however, can set the stage for a lifetime of bondage. Choose fulfillment by applying these strategies to establish a solid credit rating right off the bat.