There are a lot of guides out there about re-building your credit history after you’ve had a few credit mistakes, but there’s one mistake that a lot of people make without thinking about it: they refuse to play the credit game altogether.
It’s not quite their fault, really. You see, a lot of financial “experts” are now advocating a cash only lifestyle, which means giving up credit cards no matter what your reasons are. This might work for people that are incredibly wealthy, but the reality is that most people can’t live without credit cards. They’re a great tool, when they’re used properly. You shouldn’t have to feel like you won’t be able to build a credit history just because you might not have one already. After all, everyone started out where you are and some people have a lot of credit behind them!
It helps to build credit when you’re employed, so that you can prove that you’re actually a relatively low credit risk. In other words, you should be in a position where you will always be able to pay back any of the credit cards and/or loans that you get from other people. You don’t have to feel like it’s impossible to get your credit history rolling forward.
In fact, it’s just a matter of following a few steps:
First and foremost, you will want to make sure that you start as well as possible. You don’t want to feel like you have to take out massive loans at the very beginning. Sometimes, you can just go down to your bank and get a signature loan. As the name implies, this is a small loan that is essentially guaranteed by your signature. You will need to pay it back, but other than that, you will have no other issues that you need to think about.
Sometimes people group signature loans together to create a real ladder that they can use to get further than if they just took out one loan, but you’ll need to just watch your credit report as you go along.
Speaking of monitoring your credit report, this isn’t a bad idea for a few reasons. For starters, you will be able to immediately tell if someone is trying to use your identity to open credit in your name, and you will also be able to watch your score grow over time. It’s really the best way to go if you’re really serious about building solid credit for the long run.
Now, you might be tempted to try to sign up for as much credit as you can get in a short period of time, but you really don’t want to do this either. For starters, it’s going to make it hard for you to maintain a proper credit score, because you will lose points for having so much credit generated in short time.
It’s much more important to make sure that you pay on time for the credit lines that you have. You shouldn’t strive to add more than one new line of credit a year. Again, this is only if you can afford it — you do not want to end up being unable to pay for the credit lines that you have currently.
At the end of the day, you have to remember that it can take a lifetime to really build a solid credit history. However, most of the work is actually done for you. As long as you maintain your payments and handle things o n time, you will see your credit score get better over time. There’s no need to feel like good credit is impossible. With a little bit of work, you can have a great credit score that you can truly be proud of!