It is credit which makes the financial world revolve. Lenders tend to make decisions about the borrowers related to their credit worthiness primarily on their credit scores and credit reports which are considered to be the easiest and quickest way to assess the credit history of an applicant. Your credit history will determine as to whether you will qualify for a credit card or not. Have you ever defaulted on your loan payments? Are you paying your credit card bills regularly and on time? All these and many other aspects are a part of building credit history.
However, these aspects are a serious catch for new borrowers or those applying for their first credit card. How are you supposed to qualify for a credit card without having any credit history and will you have a credit history without first getting qualified for credit?
If you are more into building credit from the ground level, there may be various questions in your mind. What are the prerequisites for obtaining a first credit account? What are essentials that lenders look for? What are the traps of obtaining credit? Finding a good way to build strong credit history requires the following points to be considered carefully.
-A credit report is the best way through which lenders check creditworthiness of the applicants however, if you are new to credit, then your bank account is the next way to prove your financial responsibility. Information about your savings account is not included in the credit report and so most lenders will require it to know as to how you have been handling your money in the past few years. Moreover, it will also show how steady income you have.
-Another good way for building credit is to pay your utility bills on time. Many credit scoring models such as FICO and PRBC incorporates history of utility bill payments as a major criterion for checking credit worthiness. Obviously, in order to receive a good score from these scoring models, it is important that all bills are paid on time.
-The best thing about creating a credit history is that you can seek help of any other person having an established credit history. This other person can be your parents, friends or older siblings to co-sign your credit application. The benefit is that the doubts of the lender regarding your thin credit history will be reduced and you can start building credit on the strong credit history of your co-signer.
-In order to put forward the right foot in the credit world requires you to apply for a secured credit card. A secured credit card has no collateral which backs its credit line. Having this card, the bank will allow you to borrow money limited to your credit cap without any guarantee that the money will be repaid.
-Applying for a small loan is another way of Building Credit apart from credit cards. Obtaining a student credit is the best way to get started as they have lower interest rates and you are not required to pay it till the sixth month after your graduation. The drawback of this loan is that it will not appear in your credit report until you start repaying