The Do's and Don'ts for Establishing Credit
by: David Cooke
We all need credit. If you want to rent a car or even open an account at the local video store. They will ask you for a credit card. Getting a card is easy for most people. Invitations arrive in the mail asking you to fill out a short application to get your card.
Some people live under the radar for credit card companies. They may be students, newcomers to the country or they may have had bad credit in the past. I have put together a list of Do’s and Don’ts for those people who want to establish credit.
1. Open a bank account. This will not appear on your credit report, but bank account numbers are often requested on credit applications.
2. Apply for a credit card. To avoid being denied credit, apply only for those cards whose requirements you are likely to meet. Department store or gas credit cards are usually easier to obtain than a bank-issued card with a Visa or MasterCard logo.
3. Charge purchases and make payments on time. Use your credit card for small purchases, and make sure to pay the balance on time. Once you have used the card responsibly for three months, you may want to apply for a Visa or a MasterCard. These cards will allow you more flexibility in charging purchases,.
4. Create a spending plan. Before you use your credit card, you will want to make sure that you are able to pay off the balance on the items you plan to purchase. Write down all of your expenses and your income and adjust your spending accordingly.
5 If you have trouble qualifying for a credit card, you may want to apply for a secured card. These cards have credit limits based on a required deposit made by you into a savings account. You use the card just as you would any other credit card. After a few months you can ask for a regular credit card and get your deposit plus interest back.
6. If you are denied credit, ask why. Ask any creditor that denies you credit to give you the reasons you were denied. Reasons may include income, employment or credit history. It is important to find out why you are denied, because frequent inquiries (applying for credit) on your credit report can be viewed as a negative to a potential creditor. If you are denied credit, you can request a free copy of your credit report to see if there is erroneous data on it and have corrections made.
7. Avoid missed or late payments to any creditor. That is a sure way to damage your credit rating.
8. Don't let anyone else borrow your credit card, debit card or in any way have access to your bank account. You are responsible for any authorized use of your accounts. I have found that family members and ex-spouses are some of the biggest reasons by people have bad credit
9. Don't give your card number to anyone over the phone or Internet unless you have initiated the transaction. Credit card fraud is growing all the time. Ask to call them back or even better ask for a mailing address.
10. Finally, be responsible with your credit. Don’t use if for impulse purchases. If you find that you can not make a payment, make the minimum payment to keep your card in good standing. If that is not possible, call the credit card company and tell them about your situation. They may give you a miss a month option which will preserve your credit.
About The Author:
David Cooke is a senior mortgage consultant in Calgary, Alberta, Canada.
He writes articles on credit and mortgages for local publications and internet sites in his spare time. You can find out more about mortgages and credit by visiting his website at:
http://mortgagealliance.ca/davidcooke
August 2006
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