The Basics of Good Credit

By: Tom Ambrozewicz

If you have never had to apply for a loan or rent an apartment, you may not understand the emphasis on having good credit. Your past record of making payment on bills, keeping a steady job, and various other proof of stability is all documented in your credit report. It may seem trivial to some; however, when applying for a loan of any type it is the point that can either make or break the deal. It is best to get a good credit record established as early as possible to get your financial future set on the right path.

A common struggle when trying to establish credit is getting your foot in the door. How do you rent an apartment or apply for a home loan if you have no credit history? You could get a co-signer to help get approved for a loan that you pay back over time. If you are in college or high school and still living with your parents, perhaps they could put your name on one of their monthly utility bills. Any bill that is in your name and paid on time will be a good start to proving that you are credible.

Maintaining a good relationship with a bank over time will reflect positively when it comes to building good credit. Keeping a positive balance shows that you are capable of managing your finances well enough to have extra money to put into a savings or checking account regularly. This will increase your chances of being accepted for a loan from this particular institution as well because they have a record of your loyalty to them and ability to make payments. Do not take out a loan if you have any doubts about being able to make payments on it because if you end up with bad credit on your record, it will likely be tough to get back on your feet again.

Most people plan at some point in life to own their own home or purchase a new car. It is not common that even a responsible person is not able to pay many thousands of dollars in cash for these expensive belongings, which is where your good credit will be necessary to take out a loan. There are basic actions that you can take before you even reach the age where you are ready to move out of your parent's home to be prepared for a stable and good credit rating.

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