In America, having good credit can affect many of the choices for your lifestyle. A majority of the needs that you will have will be associated with the type of credit score you have, and this can even include utilities such as electricity, water and gas. Having good credit also allows you the benefit of lower interest rates on larger purchases as well as not being required to pay large, upfront sums of money for services. Understanding and establishing good credit should be a priority.
Currently there are three major credit rating companies that monitor everyone’s credit: Experian, Equifax and TransUnion. These companies follow all of your payment history and create a credit score for you based on this history. Each one has a bit of a different rating system and therefore you will probably find a slightly different score for each organization.
A credit score is based on a number of factors: If you are making required payments on time, how much outstanding debt you have as compared with your income and how many credit inquiries you have had. It’s important to make all payments on or before the due date so that this doesn’t affect your score.
Establishing credit for the first time may require a letter of recommendation from your landlord or any other company that you have been making payments to on time. Filing for a credit card with a company such as a store credit card will require a few extra steps the first time. You will have to prove your income, supply letters of recommendation and any banks that you have accounts with. It will be important that you have not shown any bounced checks or overdraws in your checking account. At that time, a credit inquiry will go on your record with one of the three credit score companies. Once approved, it is highly important that you maintain a good payment schedule for at least six months before applying for other credit.
Credit cards such as Mastercard and Visa may be the next level of credit that you want to attain. While these are marvelous to have, the interest rates can be dangerous and if misused, you can find yourself in a situation where you are making high payments with most of the payment going towards the interest. Before you decide to open either of these types of accounts do an inquiry online to find out which credit card companies offer the best interest rates. Some may have extra specials, such as airline miles or loyalty points, however examine these carefully because there may be hidden fees or requirements that may sound good but are really deceptive.
Once you have established credit you will need to make sure that your credit score and credit information is in good standing. All three of the credit organizations allow a free, once per year ability for you to request your credit information. Most of this is available online. Taking this action is highly recommended due to the amount of credit ‘theft’ that has been occurring in the last few years. Monitoring your own credit also gives you the chance to correct any errors that may have an effect on your overall credit score.