Beginners Guide to Credit
I remember back when I was 18 and completely oblivious to the concept of credit. It seems like eons ago! If only I had known then what I know now about credit. Hopefully, this short guide will be able to give you some ideas on how you can build a solid credit rating... even if you have to do it from scratch!!
Everyone has to start somewhere, whether you are 18 like I was, or even 30, there is no better time than the present to start thinking about your financial future. Chances are, your credit score will come into to play during some point down your financial-life road. And when that time comes, you had better have some concept of credit and how it can help you, or else you might find yourself unable to qualify for much of anything.
First of all, if you are starting from scratch, don't worry! It will take some time, but eventually you will be able to qualify for the bigger things like a car or a mortgage. The first thing you need to do is establish your credit. The easiest way to do this is to get a credit card issued by your bank. Chances are, the bank already knows you and won't have as much of a problem with issuing a card to one of it's current clients. If you don't already have a checking account, get one! There are a ton of great banks out there that issue free checking accounts with check cards to new customers. But take note! A check card or ATM card isn't the same as a credit card! With these you are simply withdrawing the money that you already have in your checking or other accounts. A credit card is very different...
A credit card is actually a right given to you by your lender to borrow a set amount of money from them. You might be shocked to find out that the only card you can get when you are first starting out comes with an outrageous interest rate. Sometimes as high as 15-25%. But don't fret... as long as you pay off your balance every month, those interest rates will be easier to swallow, and you will eventually to be able to qualify for a card with a much lower rate.
A note for the beginner: In order to have a good credit score for life, you need to develop a personal goal... never, EVER make a late payment for anything. I was lucky when I first started building credit to have a mother that ruthlessly instilled in me a healthy respect for the power of paying bills on time. It not only builds your credit quickly, but makes you a good steward of your finances. There were times when I owed money for a credit card bill, and I was so deathly afraid that the creditor would take the bill to collections and ding my credit, that I stooped to borrowing money, just to make sure my credit record stayed clean! I know that seems a little crazy... but trust me, it is extremely important to pay all of your bills on time, even if you have to go out of your way to do it. You will appreciate your diligence down the road.
A warning for the Beginner: Be careful with your spending! It may seem exciting when you first get a credit card with a $1,000 limit, but it can be very dangerous. It is very tempting to pretend that your credit card represents money that you have in the bank. My advice, don't ever spend more than you can pay off in that same month. And if you aren't able to pay off your entire balance in a month, pay more than the minimum requirement. This will help give you a slight boost.
Moving on... After you have had your bank issued credit card for a while, and feel that you can handle the responsibility, try moving onto one of the major credit card companies. There are many out there. Try to find one with the lowest interest rate and no annual fee. Don't apply for too many at once! Each time you apply for a C.C., the company will run your credit to see if you will qualify, and to see what your spending limit should be. One or two should do just fine. If you did well in handling your bank C.C., you should have no problem qualifying. A company I like is Providian; mostly because they give you a brief snapshot of what your credit score is each month, and as a beginner, you will want to start paying attention to what your score is and how it can be effected by your different spending habits.
After a while of responsible spending with your new credit cards, your score will really start to move. You'll notice multiple credit card offers from many companies mysteriously start showing up in the mail. Your score will probably be somewhere around 600-650. This isn't a bad credit score, but it could be better. Most likely, it is around this range because of your lack of credit history. As you can see in our Credit overview section, length of credit history accounts for around 15% of of your overall score.
Another factor that comes into play with your score is the type of credit you have been issued; approx.10% of your score relies on it. You can only build so much credit with your credit cards. Eventually lenders will like to see some other forms of proof that you are able to be responsible with monies borrowed. This is where a personal loan, or a car loan can be helpful. Lenders view this as a different kind of borrowing than from the credit card companies. In terms of building your credit, these types of loans are great.
After that, you should see a significant leap in your credit score, and should be able to move onto bigger and better things like a home mortgage loan! Just always make sure you remember the fundamentals: always pay your bills on time, and never spend beyond your means. With these tips in mind, you will be on your way to making sound financial decisions for life.
Justin Smith is the President of the Christian Real Estate Network -- http://www.Hismove.com
MORE RESOURCES:
 Earthtimes (press release) | US Consumer Credit Increases $14.3 Billion in June (Update2) Bloomberg - Consumer credit rose by $14.3 billion, the most since November, to $2.59 trillion, the Federal Reserve said today in Washington. In May, credit rose by $8.1 ... Consumer credit rose $14.33 bln in June US consumer credit rose at double the pace forecast in June Consumers release their credit cards from musty wallets |
Credit Crunch Videos Sky News, UK - Equity, bond, and money markets were reluctant to accept that this was going to be a global banking problem, leading to a massive credit crisis. ... Credit crunch and banks: from the Rock to a hard place Many happy returns, credit crunch Credit crunch: Around the world |
 CTV.ca | US Government charges 11 in massive credit card fraud case Heise Online, Germany - The US government has charged 11 people with stealing tens of millions of credit and debit card details as part of an operation that targeted numerous ... Video: Feds Charge 11 in Massive Retail Hacking Case Biggest Ever Credit Card Scam In US US authorities charge 11 with global credit data theft |
 Washington Post | Here comes the credit crackdown Independent, UK - One year into the credit crisis, regulators are hard at work on new laws they hope will prevent history repeating itself. Leading investment banks fear a ... Industry group to address credit risk Panel Calls for New Risk Standards Banking Group Proposes Wide Range of Reforms |
The End of Credit Card Consumerism U.S. News & World Report, DC - For more than four decades, our shopaholic nation has shown an insatiable desire to spend until our credit cards melt. And throughout this era, ... |
 Reuters | Fannie Mae expects smaller credit losses in 2009 Reuters - N: Quote, Profile, Research, Stock Buzz) will continue to see high credit losses in 2009 but such losses should be lower than this year, the company chief ... Credit Suisse auction-rate debt suit may start frenzy Credit crunch cripples European insurers' profits Credit crunch cripples European insurers' profits |
Credit Suisse Sued Over Auction-Rate Securities (Update3) Bloomberg - 7 (Bloomberg) -- Credit Suisse Group, Switzerland's second-biggest bank, was sued by Swiss semiconductor company STMicroelectronics NV for allegedly placing ... STMicro sues Credit Suisse over auction-rate debt Credit Suisse sued by semiconductor firm Credit Suisse sued over 'auction' debt |
 Aljazeera.net | Credit expenses lead to $2.3 billion loss for Fannie MarketWatch - The company reported credit-related expenses of $5.3 billion in the quarter, which more than offset revenue of $4 billion. Fannie Mae also took a charge of ... Fannie Mae posts $2.3 billion loss as credit costs rise Fannie: Sun will come out tomorrow Fannie Mae Posts Fourth Straight Loss, Cuts Dividend (Update2) |
Settling the credit score CNNMoney.com - Having a good credit rating is more important now than ever, but determining exactly what yours is gets complicated. By Jessica Dickler, CNNMoney.com staff ... The FICO Score- Unregulated Discrimination? |
 iBerkshires.com | US June consumer credit rises by $14.3 bln, 6.7 pct annual growth rate Forbes, NY - Total consumer credit expanded $14.3 bln after an upwardly-revised $8.1 bln expansion in May. June's increase was well above the $6.4 bln of additional ... Consumer credit jumps at fastest rate in 7 months Consumer Credit Surges 6.7 Percent in June Credit-card Companies Making It Harder To Say 'charge It' |
Credit and Its Cost
What is Credit? Credit is money granted by a lender (or creditor) to a debtor (or borrower) whereby the lender defers receiving payment of the debt for a period. In exchange for the credit allowed, the lender will get back the money lent plus interest.
What Is a FICO Score and How Do I Make It Work for Me?
Whether or not you receive a loan and what interest rate you get on your credit card may be determined by something called a FICO score. Named for Fair, Isaac & Co.
Credit Help for Real Estate Financing: Five Categories of Your Credit Score
1. Payment History -- 35%The number of accounts paid as agreed and a good payment history give you a higher score.
Saving Money with Credit Cards
Having a credit card is a wonderful convenience for those times when you don't have immediate access to your cash. It can allow you to purchase something on time for which you can pay later, thereby giving you the ability to afford something NOW that you'd have had to save for later.
All You Wanted to Know of Bad Credit
Martin Henderson is in a fix these days. Because of his failure to repay a loan he had taken a few years back, he has been adjudged as a bad credit case.
Secured Credit Cards- Consumer Tips
Whether you have no credit or damaged credit, secured credit cards are a good tool for building a good credit history.Several months ago Tom, a member of CreditBoards.
Have You Ever Opened a Checking Account?
Maybe some of you are saving it in your trusty piggy bank, under your mattress or way back in a sock drawer. Although I'm glad that you are saving, your money is not doing anything for you locked up in your house.
SuperCharged Secret 3, Credit Card Utopia
TURBO-CHARGED KILLER RATE SAVING INFORMATION!Let's just take a brief moment to recap:If you've been following along on this journey with me, learning the 5 Super-Charged secrets to Credit Card Utopia, then you now know 2 very important things:You now know how to take advantage of zero to low interest credit card offers.You now know that there is safety in numbers, and you know the magic "Who's Who" of the major credit card companies.
Credit Cards And Loans - So Many Options - So Little Time
Credit Cards and Loans sounds like just two things, but in actuality, it is dozens of things. Due to a combination of user preferences, lifestyles, and marketing ideas, there are dozens of different types of credit cards out there.
Tips For Getting Your First Credit Card
Most of us get a credit card on our name when we go to college or when we are in our senior years of high school and all of us stumble into the same types of difficulties when it comes to finding an issuer and managing the credit card. Most banks ask for a prior type of credit history that most of the time lacks and for some type of warranty that we will be good payers.
How To Prevent Fraudulent Credit Card Transactions
What Are Possible Signs of Fraudulent Transactions see at Web Hosting Companies?Customer wants to pre-pay for a yearDomain Name Registration for 5 years or moreOrders using free email address providers like Hotmail, Yahoo, etc.Usage of multiple cards to complete order.
Four Tips How Homeowners Can Rebuild Their Life After a Foreclosure
Let's face it, if you are facing the possibilities of losing your home due to a foreclosure and you think that you may never be able to purchase another home anytime soon. Keep reading.
Important Things to Know About Divorce and Credit
Joint debts remain joint debts.Both spouses signed a legally binding contract with the creditor, and a divorce decree neither amends this contract nor relieves the creditor's investment in you.
Credit Report - How to Improve Your Credit Score
One of the great mysteries of life is how the three major credit bureaus (Experian, Equifax, and Trans Union) score credit. They all have secret statistical formulas for determining your credit score, but they are unwilling to divulge exactly what, exactly, constitutes your score.
How Businesss Mess Up Their Credit Policies
In "Become the Squeaky Wheel" a book recently published, Michelle Dunn demonstrates the major areas a business should focus on to ensure a satisfactory customer experience.One mistake business owners make is not having a credit policy in place when they open their business.
Credit Cards Can Help You Get Out Of Debt
Your credit rating / credit score is based upon how you have dealt with credit previously. If you have always paid the full amount owing and never missed a payment then your credit score will be high.
How Healthy Is Your Credit
There's only one way to discover the "health" of your credit. You need to examine your credit report.
Credit Problems? Heres How to Manage Your Creditors
If you find that creditors are calling you almost daily or that one of more of your bills has been turned over to a collection agency, you should know how to manage your debts.First, prioritize then or rank them in terms of the ones that can give you the most trouble the soonest.
Credit Repair Scams
"Erase Bad Debt !""Remove Negative Items From Your Credit Report"You've probably seen these headlines and others just like it promising to clean up or "fix" bad credit. For someone who suffers from a bad or poor credit rating, these headlines are certainly an appealing offer.
Types of Credit Cards
There are a whole variety of different types of credit cards available which can make choosing the right one a very confusing experience. In order to help you decide, listed below is a useful breakdown of the various types of credit cards available.