9 Steps for Establishing Credit

lineCredit is the catch all term for the act of lending money. It can take the form of a credit card, in which the lender buys the things you want and you pay them back. Loans are where you have the money given to you with the promise to pay it back with interest. Any situation where you are required to provide compensation later for something purchased or used today, falls under credit. Lenders are putting themselves at risk every time they lend money, so to protect themselves, they established a credit reporting system. It consists of three bureaus, which track the credit habits of the individual, and assigns a number based upon it. This is the credit score, and it is important to protect it.

Establishing new and successful lines of credit can help to establish credit-worthiness in the eyes of other lenders. While it may seem odd to have to establish credit in order to establish more credit, it is still quite necessary.

1 – First and foremost you should choose a couple of banks, credit unions or lenders that you would like to establish credit relationships with.

2 – You probably already have a bank account, and if this is true, you should make your banking relationship even stronger by creating a $500 savings account with your home bank.

3 – Now speak with your bank consultant, and ask them if you can open up a $500 dollar line of credit, securing the line of credit based on the $500 dollar savings account that you previously opened.

4 – Now that you have a $500 dollar line of credit, the next step is to open a savings account up at a different bank using the $500 dollar line of credit to establish creditworthiness.

5 – Now you should speak to the consultant at the new bank, asking if you can open up a brand new $500 secured line of credit based on the savings account that you just opened up with them.

6 – Repeat the steps above until you have achieved this with between 3 and 5 secured credit bank loans.

7 – Make payments on the interest that is accrued by each of these accounts in order to establish the fact that you can make payments on time.

8 – Find other ways to build your credit, including paying a cell phone bill, paying utility bills and paying your lines of credit off on time. As long as the bills are in your name and utilizing your social security number, paying them on time will benefit you and your credit establishment.

9 – Periodically review your credit reports in order to make sure that you have only positive marks on your credit. If there is any wrong information or bad marks on your report, do your best to have them removed.

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