Under federal law, the three credit agencies are required to provide you with a free report every 12 months. We suggest taking advantage of your free annual report from AnnualCreditReport.com. Your credit score isn't included in your free annual credit report. In most states, the credit bureaus each charge around $10 for your score.
The higher your score, the lower risk you are to lenders and insurers. This means you'll generally have a better chance of receiving credit along with lower interest rates. Be aware that this allimportant number, which ranges from around 300 to around 850, can vary depending on the scoring model used by credit agencies and lenders.
* Research your choices: If you have little or no credit history, your choices for loans or credit cards may be limited. Retail or gas cards, and loans secured by property, such as furniture or a car, may be easier to get. You may start by asking your parents, or someone else with good credit, to co-sign on a low-limit credit card with you.
Your bank or credit union may provide another alternative. Sometimes they offer special programs for customers who need to establish credit.This can be a great way to help build credit history.
* Establish a track record: Once you have some credit accounts, it's important to use but not abuse them. It may be counterintuitive, but if you don't use credit, you won't be able to build a solid history.
* A good habit: Use your card to make small purchases and pay off the balance each month. "By charging a small amount on at least one card and paying the balance on time and, ideally, in full, you'll show that you can manage credit without charging more than you can afford to pay," Sweet says.
* Use credit wisely: If you want to be a credit superstar, follow two basic rules: Pay on time and don't go over your credit limits. For those just starting out, this is even more critical. It is important to start carefully. At this point, you don't have a long and distinguished track record that can help alleviate the impact of a small mistake, so tread carefully. Using credit responsibly means you use and pay off your cards monthly, make payments on time every time, don't apply for numerous accounts and check your report periodically.
Don't make these mistakes:
* Applying for several lines of credit and loans within a short period of time can give lenders the impression you're in desperate need of money and may have trouble paying back the debt. Keep your number of applications at a minimum and only go for the opportunities that offer the best deal.
*Part of your score is based on the amount of credit you have available but aren't using. The lower your balance (in proportion to the credit limit), the better.
* If you decide you no longer need a particular account, don't close it. The age of your accounts affects your score, so keep the oldest ones to show as long a credit history as possible.
* Don't turn a blind eye on those reports. Once you've established credit, get in the habit of periodically checking for any fraudulent activity, as well as any reporting mistakes.(BPT)