How to Establish Good Credit

Good credit is important when it comes to getting a mortgage, a bank or car loan, a credit card or even renting an apartment. People can damage their credit in a number of ways, particularly by not paying their bills on time. Fortunately, however, there are also ways to improve your credit.

First of all you need to make sure you establish a credit history. If you have never borrowed money or owned a credit card then you may not have any credit history. This means that lenders have nothing to judge you on and may hesitant to extend loans or credit to you. If you do not have any credit history then the first thing you need to do is to establish credit. One way to do this is to find get a credit card. 

If you have no credit history you may have trouble getting accepted for some credit cards. Similarly if you have a poor credit history, companies will be hesitant to give you a credit card. However, there are many credit cards that set the bar fairly low when it comes to approving applications. This is especially true for department store cards. You can start out by getting one of these kinds of cards, making small purchases and paying them off regularly. Then you can move up to a major credit card like visa or MasterCard. 

Once you have a visa or MasterCard you can do the same, make small purchases and pay off the balance on time. Many people get into trouble with credit cards by making purchases they cannot afford to pay off. Some people get by paying the minimum on their credit card balance. This practice is not a good idea because it is expensive and bad for your credit rating.  When you only pay the minimum you are basically borrowing money from the credit card company at a very high interest rate.  So only use your credit card to make purchases that you can afford to pay off immediately.

Some other things that can negatively affect your credit are having too many credit cards and not using your cards regularly. Having a large number of cards and having dormant credit cards may negatively affect your credit rating. Even applying for too many credit cards may have a negative affect on your credit rating. So only apply for cards that you plan to use regularly.


One relatively easy way to improve your credit is to get a credit card. Once you have the card you can make regular small purchases that are within your budget and pay them off promptly without carrying a balance. If companies will not issue you a credit card because of a lack of credit history or a poor credit history, then start off by getting a card from a department store chain. 

By using this card for regular purchases and paying off the balance in full every month, you can improve or establish your credit to the point where a major credit card company will approve your card application. Once you get the major credit card you can follow the same routine- make affordable purchases and pay off the balance on time regularly.