Steps to building good credit

Jet, July 5, 2004

Many experts say that having no credit can be just as bad as having bad credit, because there is no history to say if you are a good or bad risk when requesting loans.

Building a good credit record is no easy task. It may be frustrating and tedious at first, but following are some tips to make the journey to credit freedom a little easier.

* Try a secured card with a banking institution for 6 to 9 months.

A secured card is very much like a savings account where you may put $500 down as a deposit, which serves as collateral. Some institutions will issue a credit card with a credit limit usually no greater than the amount on deposit. Make sure the issuer reports your timely payments to one of the three major credit bureaus. By using your card responsibly and paying what you've spent every month, you will see your credit score improve.

* Establish credit by applying for one or two credit cards.

Setting up revolving debt credit cards like Visa, MasterCard, American Express, Discover or any department store credit cards is important to your credit history because it's a self-managed account and you know you have to pay an installment at least once a month. Financial advisors warn you to use them carefully and pay them off on time each month, or at the very least, pay the minimum amount required.

* Keep credit card balances low.

Don't "max out" your credit cards. Credit scores are based upon what percentage of the credit line is being used.

* Pay your bills on time.

How you've paid your bills in the past can indicate how you'll pay in the future. Credit scores emphasize your recent payment record, so if you've been late, start paying on time.

* Don't apply for too many loans or new accounts.

Requesting a lot of credit in a short time span may prompt lenders to be concerned that you won't manage your debt well.