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Quick Guide: Establishing good credit

Anyone who is shopping for a new loan knows how important it is to have a good credit score. A good credit score is also crucial for anyone who is looking for a job or applying insurance. Consumers who have bad credit or who never have had to obtain credit are usually surprised when they learn how hard it is to establish good credit. Fortunately, there are a few ways to establish good credit for yourself without spending a lot of money.

One of the easiest ways to establish good credit is to set up services with revolving payments. Typically, the easiest way to do this is to set up utilities such as water and electricity in your name. People with no credit history or bad credit will probably need to pay a deposit for each service. By making the payments in full and on time each month, a consumer can demonstrate that he or she can pay bills responsibly. Over time, this can improve a credit score or establish a good credit history for a new consumer.

After gaining a small amount of good credit, try to open a small credit card, loan, or line of credit in your name. Don’t expect the bank to give someone with a bad or short credit history a high credit limit. Getting a credit card with a low limit, however, will help a consumer improve his or her debt held to credit extended ratio. This will improve a person’s credit and make him or her eligible for larger lines of credit. It is important to know that a person does not have to carry a balance from month to month on the card in order to establish good credit. Despite the fact that this story has been around for a while, the truth is that credit bureaus look at the total amount of credit extended to a consumer versus the amount that he or she owes. In order to get a good credit score, it is important to keep your loan balances as low as possible.

Over time, continue to apply for loans and lines of credit. Also make sure to make on time payments. Within a few months to a few years, depending on the original situation, a consumer can establish him or herself as an excellent credit risk with most banks and lenders. While this may seem to take a long time, remember that you will see improvement in your credit score every couple of months.

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