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Positive Steps You Can Take for Improving or Establishing Credit

Every year, people who have no credit or have negative credit pay hefty fees and interest to do things some of us take for granted. We all know that if you want to borrow money for a car loan, home loan or to obtain a credit card you need to have good credit. What some people do not realize is that your credit also impacts your ability to rent a home or apartment, the amount of deposit required to establish cell phone and utility services and whether or not you will qualify for certain employment opportunities.

Today, having a good credit report and score is a necessity. Below are some methods for establishing or reestablishing positive credit, so that when it comes time to apply for a job or establish a utility account, you can provide your credit information without fear or being denied or being asked to pay large fees. 

First a bit about credit reports and scores

A credit score is a number used to help lenders identify the credit risk associated with lending you money and there are a variety of scoring methods used to determine an individual’s score.  There is the FICO Score, the Vantage Score, Equifax’s ScorePower, and Experian‘s Scorex PLUS.  Additionally, some large lenders have developed their own scoring models.

You can get a free copy of your credit reports one time per year at however, to receive the credit score there is a nominal fee.  This is the only site where you can receive a truly free copy of your credit report.

No credit score

It is hard to believe that some people do not have a credit score, yet it’s true.   This occurs when there is no data or a lack of data for the credit scoring methods to calculate. 

Adults that have never used credit and young people just starting out may find that it is difficult to get credit or a loan.  This is because without that information, lenders do not know if you are a good credit risk or if you will make your payments on time.   Follow these tips to begin your positive credit history:

  1. Apply for a secured credit card through your bank.  A secured card requires that you put money down to secure the credit card. This makes it less risky for the lender because they know if you do not pay, they will get their money. 
  2. Ask someone with a good credit history to co-sign for you.  A co-signer becomes liable for the debt in the event you do not make the payment. 
  3. Once you get credit, be certain to make your payments on time, every time. 
  4. On credit cards, avoid charging more than thirty percent of the limit.  For example, if the limit is $300 avoid using more than $100.
  5. Avoid opening multiple credit card accounts.  Build your credit slowly and methodically.
  6. Remember that you are building your history, the longer you keep an account the better. 

Low credit score

Low credit scores may be caused by a number of factors such as a short period of time using credit, late payments, too much credit, collection accounts and bankruptcy.  If you find that you have a low credit score, you are not alone.  Turn your focus to improving your credit score by following these tips;

  1. Dispute any invalid or incorrect information in your credit profile.
  2. Pay all existing credit accounts on time, every time.
  3. For bills you have fallen behind on, get current and stay current.
  4. Focus on paying down debt and credit card balances.  Avoid using more than thirty percent of any revolving credit balances. 
  5.  Avoid opening new accounts in order to transfer existing balances.
  6. Keep accounts with a long, positive credit history open.

It takes about six months to begin establishing credit and two years to see significant changes in a negative credit report and score. On the other hand, it can take one late payment to undo the positive credit you have established. Keep track of what is on your credit by checking it annually at www.annual  Your future job, home or auto insurance rate depends on it.

Published May 8, 2010.