History As Character Judgment
You establish credit by building up a history of credit, use one transaction at a time. It is your recorded credit history. This will be used to judge whether you are reliable enough to finance a home loan and determines the interest rates that you will pay to do so. It also has a direct impact on many other aspects of your life.
The easiest way to get credit without a history is to obtain a loan that has some form of security attached to it. One way is to apply for a credit card with a security deposit held on account in return for a very modest credit limit, which is usually the same as the deposit. Alternatively you could finance a car or some other large physical asset where the payments are reported to credit agencies. The bar is lower on these arrangements because the lender can recover the security, if you fail to make payments.
Make Your Credit History A Positive Record
Of course, if you intend to establish credit the last thing you want to do is miss a payment; a lot of expensive hard work would go down the drain immediately. In any case you are going to find that it is expensive to establish credit. You will be charged the highest interest rates and there will be fees for just about every conceivable reason.
What you get in return is a start to your records with the credit agencies. Your lender first reports the new finance agreement to one, two or three of the agencies. They will then report each payment when it comes due. If you have made your payment successfully, as you really must at this point, they report that. They will also report any problems such as late payment or non-payment.
Credit Here Credit There Credit Everywhere
So many aspects of modern life depend on your record of credit worthiness; everything from job applications to insurance premiums to real estate finance. Poor credit may not automatically exclude you from financial options such as home finance altogether but it will definitely make a difference in the price that you have to pay each month.
Re-establishing credit is, unfortunately all too necessary for many consumers these days. Your credit score and record will suffer if you have some sort of set-back that prevents you from keeping up with at least the minimum payments on your financial obligations each month. This is often caused by loss of employment or illness. The process is the same as that of initially establishing credit, although it may take longer and even require filing for bankruptcy before you begin.
Start Today If You Have Not Already
Credit drives the modern American consumer economy and is the core of the information services that track individuals as consumers and members of the workforce. Credit is also critical to access to finance for home loans and lease agreements. If you have not already begun to establish credit or you have struck out and need to begin again there is no time like the present to start making the moves that will ultimately help you master the financial system that is the American Dream.