How To Establish Credit: You may not realize it, but if you have recurring bills such as rent and utilities, you already have a credit history. If they are paid in a timely manner, rent, car insurance, medical, cable television and telephone bills are all indications that you are a good risk. Keep copies of the bills and your canceled checks, and ask your
landlord, insurer and power company to write letters on your behalf stating how long you've been a customer -- two years or more is best -- and that you pay on time.
If you don't have checking and savings accounts, your next step is to open them and make sure you follow the rules by keeping adequate minimum balances. Then apply for a few credit cards.
Search for the cards with the lowest fees and rates, and use them wisely to establish a record on timely payments. Don't charge more than you can afford, and make more than the minimum payment every month to maintain low balances. If possible, pay each bill in full every month.
Where To Obtain Credit And Loans
Practically every business is willing to grant credit to its customers, often with few requirements. In fact, the overabundance of credit gets people into trouble almost as much as its misuse. Consequently, it is up to you find the best rates and terms so you can live within your means.
Most newspapers and consumer finance magazines list the lowest
interest rates currently available on unpaid balances. Don't be tempted by introductory low-rate offers; they invariable mean you'll be paying much higher rates in just a few months. And skip those cards that offer a free gift or a discount on today's purchases. They usually aren't very good deals, either.
If you need a loan, start with your credit union. They usually have the best rates and terms and offer the best service. Next, try your bank or savings institution. They know you and want to keep your business.
How To Protect Your Credit
Obviously, the best way to protect your credit is to pay your bills on time. Put yourself on a strict budget and stick to it. If you have more money going out than coming in, look for ways to trim your expenses, like joining your utilities' budget plans which spread out your payments over an extended period. Remind yourself to pay by marking your calendar when bills are due. Take advantage of a creditor's automatic bill paying programs in which your payments are deducted on a prearranged date every month (but make sure to keep track of the payments in your checkbook). And ask your bank about overdraft protection just in case you don't.
If you find yourself a little short one month, or if you are having trouble paying your bills, don't hide from your creditors--call them. Perhaps they'll be willing to wave a
late fee or two and agree not to report your tardiness to the credit bureaus. Or maybe they'll agree to restructure your debt to make it easier for you to handle your payments.
You never know when the ideal home buying opportunity will present itself, but you'll want to be prepared when it does.
