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Building Your Credit History
by John M. Roberts

Credit is your reputation for repaying debts on time. The better your credit, the more willing companies and people will be to lend you money. A credit history is very important when buying a home, a car, applying for credit cards, or when buying big ticket items using credit.

Tips to establishing a good credit history.

  • Open a checking account or savings account. Checking and savings accounts aren't used to develop a credit history but their existence will indicate that you have money and show how you manage it.
  • Apply for a department store credit card or a major credit card. Department stores such as Sears, Belk, Macy's, Bloomingdale's, Target, JC Penney, Sak's Fifth Avenue, WalMart, Kohl's, Neiman Marcus, and Nordstrom's offer credit cards. The most common major credit cards are Visa, MasterCard and American Express.
  • If you don't qualify for credit on the basis of your own credit file, ask someone with an established credit history (like a parent) to co-sign your application. (A co-signer is someone who promises to pay your debts if you don't.)
  • Pay at least the minimum amount due on each account every month, and pay on time. Allow five to seven business days for payments made by mail.
  • Use your credit card wisely, and you'll have a very beneficial financial tool. If you use your credit card unwisely, and you'll run up credit card debt you can't afford.
  • Keep a record of your credit card purchases in a notebook. You can also use a variety of techniques to help you manage your finances.
  • Take advantage of services your financial institution offers. Use services such as online banking to see your account activity on a daily basis and arrange to make electronic payments.
  • Even if you pay off your balance every month, try to avoid using more than 50 percent of your limit on any one credit card.
  • The best advice for establishing a good credit history is to pay your bills on time. If you are late, even for one day, it will show on your credit report as a 30 day late. Each time you are late, your credit score drops. It normally takes at least 7 to 10 years for the major credit bureaus to take late payment reports off your credit.

Once you've established credit, it is up to you to keep it in good condition. Your good credit can serve you well throughout your lifetime and it should be considered a valuable asset.

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