The Importance of Having a Credit History and How You Can Get One

Like it or not, we live in an electronic world in which the data trail we create behind us is a critical, direct link to our current and future financial success. Though it certainly feels nice to carry a giant roll of bills in your pocket, the days when cash was king are long gone. Credit histories are routinely checked when we apply for jobs, initiate service with providers of basic utilities, or try to rent or purchase a place to live. There’s a wide array of things we inherit from our parents but a credit history isn’t one of them; that we have to build for ourselves. Typically, there are three major groups of people for whom this is an issue: college students, teenagers, and freshly minted college graduates. These are people at the beginning of their careers, on the edge of adulthood, who need to learn the basics of developing and maintaining good credit. It is important to understand what credit is, where it is and how to create it. Credit allows you to buy something now, from cappuccinos to cars, without paying any money the moment you take possession of the purchased item. Each time you use a credit card of any kind, you are making a promise to pay later, usually within a prescribed period of time. A credit history is the record of how well you kept those promises to pay. Your credit history shows if you paid early, on time or late. It creates a profile of you, your spending habits and reliability in paying your bills. Companies use your credit history to make determinations about whether or not they will do business with you as a consumer or even as an employee. Your credit history can be found primarily with three major credit bureaus, Experian, TransUnion and Equifax. It isn’t hard to build credit history but you want to make sure you build a good credit history not a negative one. Good credit will always help you. Bad credit can take years to fix, and will present roadblocks that can make even mild mannered persons want to flip their lids. Make sure as you build your credit history, not to get suckered in by deals that seem too good to be true. They always spell trouble. Take it one step at a time. Whatever you do, don’t go around applying for credit cards like a maniac who’s had one too many Red Bulls. This kind of behavior will immediately make you look desperate for credit and will lower your credit score dramatically, creating the exact opposite effect from what you want. Don’t forget, building good credit is a process that takes time and every person’s situation is unique. So, if your buddy suddenly has three credit cards and is shopping like mad, don’t go crazy with card envy. Just take a breath and count your blessings. Studies show that many times, people with lots of credit cards abuse them and end up with gigantic, crushing debt. You do not want to be that person. Always remember, no one is giving anything away. There are ways to build your credit score methodically and carefully. You need to get that first credit card. If you can’t get a major credit card, don’t despair. There are options; you can apply for a secured card, where you put up the money before you use it and then demonstrate that you can use it wisely; you can apply for a department store credit card. In this case you usually are granted a nominal credit limit, which puts a ceiling on the amount you can spend. You can use the card for small purchases and then pay them off right away. This shows you can handle credit responsibly, which raises your score and will help you obtain a major credit card down the road. The kind of card you start with doesn’t matter. Use it, pay it off, then after a few months, you can apply for something a bit more ambitious. It is always better to wait than to rush. Remember, repeated requests for credit will lower your score. The best strategy is to get that first card, whatever kind you select, and use it for small purchases over time. Pay your credit card bill on time, at the end of each monthly cycle without fail. Think of each successful transaction, each purchase and payment to the credit card company, as a brick in the house of good credit that you are building for yourself.