In the United States, the building of your Credit History is of fundamental importance as it reflects the ability to pay all debts on time. In particular, it is used by creditors, banks and lending companies to determine the creditworthiness of the applicant and to track his ability to repay debts. So if you haven’t started yet then here are some tips to create your Credit History.
What is Credit History?
Credit History is the history of your credits and your payments which illustrates the ability to repay all your debts on time.
In particular with your Credit History, you will determine your score the so-called Credit Score which will be considered to predict your future insolvencies.
This system is particularly important for creditors who before granting a loan in addition to considering income look at all past payments made by the applicant and their punctuality verifying that all debts have been paid regularly and according to the established times.
How to have a good Credit History?
Without a credit card, it is difficult to build a Credit History. But without a Credit History, it is difficult to qualify for a credit card.
So how can you build a Credit History from scratch?
Here are four steps to follow to start your climb to the top.
1) Understand what factors influence your Credit Score
Your credit score is influenced by below five factors:
Your payment history accounts for thirty-five percent of your credit score. The goal is to make all payments due on time. The more recent the Credit History will be the more relevant it will be.
Your debts affect your Credit Score for about thirty percent. The risk center will take into consideration both the total of your debts and the relationship between them and the credits. Not all debts are negative but if they exceed a certain limit they are not frowned upon.
Length of your Credit History
The number of payments made counts for fifteen on your Credit Score. This complicates things for those who have just started creating their Credit History.
Recent purchases count for ten percent. The new accounts will be suspect.
Types of credit
The types of credit used count for ten percent. It is advisable to use different types of credit.
2) Know the general guidelines
Creditors analyze your Credit Score to determine your reliability and solvency. They will be more inclined to grant loans to those who will be able to repay the sum within the time allowed.
How can you prove your reliability?
Always pay on time .
This rule is fundamental and applies to everything including loans, mortgages, credit cards, etc.
- Keep the level of debts on your credit card low.
- Use your credit card regularly but don’t spend money you don’t have.
- Try to keep your expenses below the credit limit.
- Keep your account open for as long as possible, because this will raise the average age of your account and also the credit limit. Don’t open too many accounts altogether because this, on the contrary, will lower the average age of your accounts.
- Check your Credit Report periodically and make sure everything is correct.
- Try to diversify the types of credit you use. For example, if you pay the credits in installments you will increase your score.
- Don’t use debit cards too much because they will never help improve your score.
3) Check your Free Credit History Online
You can check your free Credit Report per year. To know your score instead, you will be able to register at different sites that offer credit monitoring services with a free trial period.
4) Request your credit card
Once you understand how your Credit Score is calculated and how to manage your expenses then you will be ready to have your credit card. However, qualifying for a credit card can be difficult. If you are a student, there are cards specially designed for students. Alternatively, you can request a Secured Credit Card which gives limited credits and does not involve risks for the issuer. Once approved, you will be required to pay a small deposit and your credit limit will be determined. When you close the account the deposit will be returned to you.