What is Worse Than Having Bad Credit?

By: Amanda Hash

Worse than having bad credit, is not having credit at all, no records, whatsoever. Such is the case of very young people who have not had the opportunity to use a credit card. Probably, it is better for them not to learn the hard way. But the truth is that when these citizens ask for credit for the first time, the have no records to go by.

An Empty File

Having an empty file is not necessarily the worst situation, since bankruptcy could be even worse, but there is no information on the person's credit records and a lender who uses his common sense, will not risk lending the money solicited by a young, inexperienced person with no records. In the best of cases the lending agent will try to give some sound advice, but will more often than not, turn down the request.

There Are Exceptions, Though

The exceptions are lenders who will compensate the risk with a higher interest rate. So, considering the age of the prospective borrower, we must assume that his or her income is not necessarily important, making it very hard to keep up with payments.

There Is A Way

It does not mean cheating the system. It is just a wise use of the rules, obtaining as only benefit, a positive rating in your credit report and in a short time. Most banks will open a regular savings account to anyone over 18 years of age. If you have $400, you will be able to start sooner; otherwise just save as much as you can at a time, until you get to that amount.

The technique is to deposit the money in a bank account and then asking for a loan for the same amount. Sounds silly, but it is feasible... With that cash, you go to another bank and do the same and again a third time. With the proceedings of one loan you start paying for the installments of the previous loans, you free credit and you draw more money on a new loan and so on, until you get good entries in your credit report.

Every payment you make must be on time or before due date. The credit agencies do not register the amount or what you did with the loan. This way you will be testing yourself and getting into the habit of paying on time for when it is the real thing.

Now, Check Your Credit Report

Request your credit report to any of the three credit bureaus and you will find the entries of your loans and the prompt payments of all, or more, if you have the patience and the time to do it in a co-ordinated way.

Now, The Big Bucks

Once you have your credit report with a good score, you can go for the big bucks. Well, there is no hurry, but I mean to say that the doors are open to a larger loan or line of credit to get you a decent beginning in life.

Even before you think of raising a family, you can start to tap into investments, financed with a loan and you will surely be better off than many others who have not cared to build themselves a good credit rating. Those, wait for the water to reach their necks and only then, start thinking about taking a loan to get by.

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