Are you just starting out and looking to build up a good credit history? Sometimes applying for a house loan or auto loan can be rejected due to not only bad credit but by having no credit record at all. From the time that you get your first credit card, you will need to use credit responsibly.
Where To Start
The first thing I would suggest doing is applying for a credit card. Usually a MasterCard or Visa is a good choice. Try applying for one that has a decent credit limit but not excessive. You will also want find one that doesn't have high interest rates or annual fees. Choose only one credit card to start with.
The Process
Once you receive your card you will only want to charge what you can afford to pay back. This shows lenders that you are responsible and will only borrow what you think you can pay back. This will also keep you from going into debt.
Keep your spending below half of whatever your credit limit is. Never max out your card because chances are you will have a hard time repaying it in full on time. This may give lenders the impression that you are neither organized nor responsible. You should always pay your balance in full and on time. After a short period of time you may start receiving offers for more credit cards. My suggestion would be to throw away the letters and forget about them. By staying with one credit card you will begin to establish a good credit reputation. By being able to fulfill your part as a credit card holder, lenders will view you as dependable.
If you are unable to always pay the full balance off then its okay to carry a balance as long as you do it in a manageable way. Always pay more than the required monthly payment. This will keep it at a reasonable level and will allow you to pay off the balance quicker. If you only pay the minimum amount required it will take longer to pay off because most of the payment is going for interest fees that accumulate every month.
Other Suggestions
If you have a checking account ask to see if they offer a credit card for members. If so, apply for one. This will be a bit easier to maintain since you are already a customer there. Also, if you have any problems or issues you know you can always contact your bank directly.
If you have a favorite retail shop that has reasonably priced merchandise, you could apply for a credit card through them. Make sure they do not have high interest rates or outrageous membership fees. Most retail shops carry a higher interest rate than a normal credit card and they sometimes charge annual or membership fees depending on the company. Even though these cards require more attentiveness, as long as you maintain a balanced account with them it will improve your credit history.
Avoid applying for several different cards at once, it makes you seem desperate for credit.
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