Establish a Strong Credit Report Today

There are many articles written and much discussion about improving credit scores and repairing credit that has deteriorated, however, before you can begin to improve or repair, you actually need to establish some credit.

The first step in establishing credit is to either borrow money or open a credit card. Borrowing money from your parents or best friend will not count towards building your credit report. Instead, you need to borrow money from a financial institution such as a bank or a credit union. Typically, these money lenders will want to review your credit history before giving you any money, even a small amount.

However, they will consider lending you money if you have an account, such as a savings or checking account, with their institution. When you deposit money into an account, the bank may consider lending you an equal amount and use your bank account as collateral. Before granting you any type of loan, a lender will also need to know that you have a regular source of income such as a job, income from investments, or even Social Security or retirement pension benefits.

It is very difficult borrow any money and build credit without a reliable and consistent personal income stream flowing into your household every month. Once you get the loan, don't pay the money back immediately, instead pay the money back over a period of time and make sure that you make your payments before each monthly deadline. Establishing good credit usually requires a twelve to twenty-four month history of on-time payments, and credit reporting agencies give high marks to people who have demonstrated the ability to borrow money and make their payments in a timely fashion.

Another way to establish credit is to open a charge card and use it for purchase. The easiest credit card to qualify for is typically a gasoline company card or a card offered through a local retailer. It won't do you any good if you open a card and never use it. Again, credit reporting agencies want to make sure that you can handle credit and the best way you can demonstrate this is to make purchases and pay on time. You will not be penalized if you pay your balances off in full every month, plus you will not pay any interest or finance charges if you do pay in full.

Do not make the mistake of opening multiple charge cards in a short period of time thinking that will help you build your credit history faster. Credit reporting agencies are concerned about individuals who have too much credit available to them and those that appear desperate for available funds. Don't assume that by avoiding loans and credit cards altogether that the credit reporting agencies will look favorably upon you. Lack of credit is almost as bad , if not worse in some cases, than excess credit.

A good mix of borrowing for the best possible credit rating is four credit cards, one gasoline, two retailers and a major card such as Visa, MasterCard or Discover and an installment car loan. This combination will take care of any purchases you want to make and help you establish a strong credit history for the future.