Building a Good Record
The best way to maintain your credit standing is to repay all debts on time. But there may be complications. To protect your credit rating, you should learn how to correct mistakes and resolve misunderstandings.
When there's a problem, first try to deal directly with the creditor. Credit laws can help you settle your complaints without a hassle.
On your first attempt to get credit, you may face a common frustration: sometimes it seems you have to already have credit to get credit. Some creditors will look only at your salary and job and the other financial information that you put on the application. But most also want to know about your track record in handling credit, namely, how reliably you've repaid past debts. They turn to the records kept by credit bureaus or credit-reporting agencies, whose business is to collect, store, and report information about borrowers that is routinely supplied by many lenders. These records include the amount of credit you have received and how faithfully you've repaid.
Here are several ways you can begin to build a good credit history:
- Open a checking account or a savings account or both. These do not begin your credit file but may be checked as evidence that you have money and know how to manage it. Cancelled checks can be used to show that you pay utilities or rent bills regularly, a sign of reliability.
- Apply for a department store credit card. Repaying credit card bills on time is a plus in credit histories.
- Ask whether you may deposit funds with a financial institution to serve as collateral for a credit card; some institutions will issue a credit card with a credit limit usually no greater than the amount on deposit.
- If you're new in town, write for a summary of any credit record kept by a credit bureau in your former town. (Ask the bank or department store in your old hometown for the name of the agency it reports to.)
- If you don't qualify on the basis of your own credit standing, offer to have someone cosign your application.
If you're turned down, find out why and try to resolve any misunderstandings.