Credit reports and scores are two factors that may help you establish a strong financial framework. A clean report and a high credit score may allow you to secure better loans, improve your employment opportunities and obtain more favorable interest rates.
Building a strong credit history plays an important role in your credit reports and scores. By learning the fundamentals of a credit history, you may not only improve their financial literacy, but you may even be able to save money down the road.
One of the best ways to begin building your credit history is to start small with a credit card. There are a number of credit card options specifically designed for consumers with no credit, but these products tend to carry high interest rates and hefty fees.
Therefore, you may choose to opt instead for a credit card issued by your bank. Because your financial institution has a running list of your financial behavior, they may be more likely to approve a credit card application than an unfamiliar lender.
With these cards, you may want to only charge amounts you know you will be able to pay off at the end of each billing cycle. Paying your bills in full each month will allow you to avoid accruing interest charges, while showing lenders that you can handle credit responsibly.
Many lenders, landlords and insurance providers look at credit reports and scores to determine how consumers handle their credit and financial obligations. Because your score is dependent on your credit history, having an excellent track record of managing your credit accounts may make you more eligible for a new loan, more attractive as a rental candidate and better qualified for a lower insurance premium. At the end of the day, building a credit history may be an efficient way for you to save money.
Consequences of a Bad Credit History
Consumers who do not establish a credit history or who have negative aspects on their credit reports and scores may not only struggle to qualify for loans and financing offers, but they may do so for years. Individuals who endure a bankruptcy, foreclosure or delinquency on an account may see damage that lingers between seven and 10 years, according to a recent FICO study.
Building your credit history takes time and requires diligence and attention. Don't try to rush the process or cut corners. Doing so could result in credit troubles that inevitably end up hurting your finances.