Why do you need a good credit score?
Establishing a good credit score is one of the most important tasks every American citizen faces. Your credit is going to be graded with a credit score. Your credit score is a numerical illustration derived from the statistical breakdown of your credit files, to signify your creditworthiness. A credit score is mainly based on information listed in your credit report as reported by the credit bureaus. There are three main credit bureaus: Equifax, Transunion and Experian. Each credit bureau will have different information about you, your debt and your creditors. And therefore, each credit bureau is going to report a different score for you. Credit scores can range from as low as 300 to as high as 850. A credit score of 600 -700 is decent. Anything about 700 is very good. Below 600 is considered poor credit.
Encompassing a good credit score is extremely important. Your credit score, also known as your FICO score, is going to influence many aspects of your life; most importantly your financial well-being but also the rates that you will receive for your auto insurance, your ability to obtain that job you want or even that apartment you are interested in. A potential employer will view your poor handling of debt as a sign that you will not perform while working, while a potential renter may assume that you may not be able to pay your rent timely or in full.
How Do I Get Credit?
As a minor, you won’t have to worry about credit, but as soon as you turn eighteen, you must begin establishing credit for yourself. The first steps for obtaining credit are to open a bank account in your name and also put a few utility bills in your name. This can include your home and/or cell phone as well as the electric, gas and cable to name a few. Pay these bills timely and in full and your credit will begin to become established. The bank account is important because you will need a checking account so that you can write checks or schedule automatic drafts for paying these bills. A bank account will also help build your credit up
After about 3-6 months of positive account history with your new utility bills, apply for a credit card. It is difficult to get a credit card with no credit at all, but now you will have some credit. Since this will be your first credit card, you will likely want to apply for a secured card first. Unlike unsecured credit cards that offer a set spending limit via a credit line, a secured card requires you to deposit money into an account and you only will be able to spend that money. When the deposited funds are used up, you will need to add more money to the account. Credit cards offer great temptation and until you get the hang of this spending power, a secured credit card is definitely better for your needs. While in the beginning stages of credit card use, a good idea would be to visit some credit card information sites and familiarize yourself with what smart credit card use is.
Once you have become a seasoned credit card user for 6 – 12 months and your credit is now in the 600s, the next step for establishing credit is to apply for a small unsecured personal loan. Getting approved for these types of loans would not be possible with no credit or even minimal credit. If you have been paying your utilities and credit card bills timely and in full every month, you should have no problem at all getting approved for a personal loan. It is very important that you utilize a loan provider that is reputable and provides favorable rates and terms. There are many predatory lenders out there that will take advantage of the unsuspecting with loans that seem to be good to be true.and ultimately are. If you are not careful, you can end up with a loan that will end up costing you an unbelievable amount of money by means of inflated interest rates. Equally crucial is that you do not apply for a loan that you are not going to be able to make payments for.and will ultimately default on. If you neglect to make your loan payments, your credit that you worked very hard to establish will be severely adversely affected. But, if you practice positive account activity, your credit will rise to levels of excellence; in the 750-800 range!
In conclusion, getting credit a good score is not difficult. Besides following the steps above, the best thing you can do is to do research and read as much as you can about credit. There are companies like Choice Personal Loans that not only offer unsecured personal loans but also provide consumers with an abundance of information that will help educate them about all things related to getting a good credit score.