Building Good Credit
The basics of good credit start with having three open trade lines, with twelve months of good payment history. For example, get three credit cards, even secured credit cards, and use them responsibly for a year. Charge only small purchases, such as your groceries and gas for your car, and always, always, always pay on time, every time, and in full if you can manage. Do not foolishly fall back into a poor credit ituation fter all of the hard work just to get to this point.
Another way to get some good credit history is by getting and paying a loan. Borrow $10,000 from your bank to use for a $10,000 certificate of deposit (CD). You pledge the CD as collateral for the loan, and they hold the CD for safe keeping. Of course, there is some expense to you involved, you will have to pay a small spread on the loan. For example, if the CD pays 4% and the loan is at 8%, so your cost is 4%. You may be able to arrange to have the CD interest paid automatically against the loan payment, with the rest deducted from your checking account, with the final balance of the loan due when the CD matures. Make sure to pay the loan monthly, to create a pay history on the loan. Also, make sure that your bank agrees to report the loan to the credit bureaus, and request that it be listed “secured” and not “secured by CD”. This is just an example, and should work with any amount of money. Of course, keep in mind that the larger the loan, the greater the loan costs in interest. Your credit rating will improve with a good payment history.
If you have good payment history which is not reflected on your credit report, perhaps because the lender does not report to the credit bureaus, you do have the right to have this information included. Obtain from your lender a current payment history or similiar statement, something that shows that you have paid regularly, on time, and without penalties, for a period of at least 3 months. Use Sample Letter 7 to get the credit bureaus to include this history in your credit report. Remember, follow the mailing instructions.