Beginners Guide to Credit

I remember back when I was 18 and completely oblivious to the concept of credit. It seems like eons ago! If only I had known then what I know now about credit. Hopefully, this short guide will be able to give you some ideas on how you can build a solid credit rating... even if you have to do it from scratch!!

Everyone has to start somewhere, whether you are 18 like I was, or even 30, there is no better time than the present to start thinking about your financial future. Chances are, your credit score will come into to play during some point down your financial-life road. And when that time comes, you had better have some concept of credit and how it can help you, or else you might find yourself unable to qualify for much of anything.

First of all, if you are starting from scratch, don't worry! It will take some time, but eventually you will be able to qualify for the bigger things like a car or a mortgage. The first thing you need to do is establish your credit. The easiest way to do this is to get a credit card issued by your bank. Chances are, the bank already knows you and won't have as much of a problem with issuing a card to one of it's current clients. If you don't already have a checking account, get one! There are a ton of great banks out there that issue free checking accounts with check cards to new customers. But take note! A check card or ATM card isn't the same as a credit card! With these you are simply withdrawing the money that you already have in your checking or other accounts. A credit card is very different...

A credit card is actually a right given to you by your lender to borrow a set amount of money from them. You might be shocked to find out that the only card you can get when you are first starting out comes with an outrageous interest rate. Sometimes as high as 15-25%. But don't fret... as long as you pay off your balance every month, those interest rates will be easier to swallow, and you will eventually to be able to qualify for a card with a much lower rate.

A note for the beginner: In order to have a good credit score for life, you need to develop a personal goal... never, EVER make a late payment for anything. I was lucky when I first started building credit to have a mother that ruthlessly instilled in me a healthy respect for the power of paying bills on time. It not only builds your credit quickly, but makes you a good steward of your finances. There were times when I owed money for a credit card bill, and I was so deathly afraid that the creditor would take the bill to collections and ding my credit, that I stooped to borrowing money, just to make sure my credit record stayed clean! I know that seems a little crazy... but trust me, it is extremely important to pay all of your bills on time, even if you have to go out of your way to do it. You will appreciate your diligence down the road.

A warning for the Beginner: Be careful with your spending! It may seem exciting when you first get a credit card with a $1,000 limit, but it can be very dangerous. It is very tempting to pretend that your credit card represents money that you have in the bank. My advice, don't ever spend more than you can pay off in that same month. And if you aren't able to pay off your entire balance in a month, pay more than the minimum requirement. This will help give you a slight boost.

Moving on... After you have had your bank issued credit card for a while, and feel that you can handle the responsibility, try moving onto one of the major credit card companies. There are many out there. Try to find one with the lowest interest rate and no annual fee. Don't apply for too many at once! Each time you apply for a C.C., the company will run your credit to see if you will qualify, and to see what your spending limit should be. One or two should do just fine. If you did well in handling your bank C.C., you should have no problem qualifying. A company I like is Providian; mostly because they give you a brief snapshot of what your credit score is each month, and as a beginner, you will want to start paying attention to what your score is and how it can be effected by your different spending habits.

After a while of responsible spending with your new credit cards, your score will really start to move. You'll notice multiple credit card offers from many companies mysteriously start showing up in the mail. Your score will probably be somewhere around 600-650. This isn't a bad credit score, but it could be better. Most likely, it is around this range because of your lack of credit history. As you can see in our Credit overview section, length of credit history accounts for around 15% of of your overall score.

Another factor that comes into play with your score is the type of credit you have been issued; approx.10% of your score relies on it. You can only build so much credit with your credit cards. Eventually lenders will like to see some other forms of proof that you are able to be responsible with monies borrowed. This is where a personal loan, or a car loan can be helpful. Lenders view this as a different kind of borrowing than from the credit card companies. In terms of building your credit, these types of loans are great.

After that, you should see a significant leap in your credit score, and should be able to move onto bigger and better things like a home mortgage loan! Just always make sure you remember the fundamentals: always pay your bills on time, and never spend beyond your means. With these tips in mind, you will be on your way to making sound financial decisions for life.

Justin Smith is the President of the Christian Real Estate Network -- http://www.Hismove.com

BBC News
Ex-Credit Suisse brokers indicted on fraud charges
Financial Times, UK - Sep 5, 2008
By Joanna Chung in New York Two former Credit Suisse brokers have been indicted on fraud and conspiracy charges related to the sale of auction rate ...
Former Credit Suisse broker arrested in US Swissinfo
Former Credit Suisse broker charged with subprime-linked fraud in ... International Herald Tribune
UPDATE 1-FBI arrests ex-Credit Suisse broker Reuters
Independent - Forbesall 527 news articles

Boston Globe
US travelers face credit snafu
Boston Globe, United States - 5 hours ago
By Eric Lucas All I wanted to do was buy gas, so I put my credit card in the automatic card-reader and got ready to fill the tank. ...
Bridging the gap year: stay out of the red in the wild blue yonder Independent
all 2 news articles

Clock ticks down on credit bureau class-action deal
Indianapolis Star, United States - 6 hours ago
In a class-action settlement, credit bureau TransUnion has agreed to provide free credit- monitoring services to millions of consumers to settle claims it ...

MORE COLLEGE CREDIT
Chicago Sun-Times, United States - 16 hours ago
Despite the current nationwide credit crunch, the State of Illinois secured $100 million for the student loans by tapping a new source -- credit unions. ...

CEP News
S&P raises Nalco Co.'s credit rating
CNNMoney.com - Sep 5, 2008
NEW YORK (Associated Press) - Standard & Poor's on Friday upgraded its corporate credit rating on Nalco Co., citing bright prospects for the company to ...
S&P puts Fifth Third on credit watch Dayton Daily News
Credit rating soars in District 300 Northwest Herald
Starbucks downgraded to 'BBB' on weakening credit metrics - S&P Hemscott
CNNMoney.com - CNNMoney.comall 107 news articles

Credit Report Need Fixing? Take Action Yourself
Hartford Courant, United States - 15 hours ago
Mike Ferrara wants to buy a house in a few months and is worried that mistakes on his credit report will keep him from obtaining the loan he will need. ...

BBC News
18 months of credit crunch ahead, says HBOS chief
Sunday Herald, UK - 14 hours ago
By Bridget Morris THE GLOBAL credit crunch is likely to last until 2010, the head of Britain's largest mortgage provider has claimed. ...
HBOS chief says credit crunch to last through 2010 International Herald Tribune
Credit crunch will last another 18 months Telegraph.co.uk
Credit crunch to last another 18 months Times Online
Reuters - Glasgow Sunday Mailall 42 news articles

College students should study up on ID theft
Chicago Tribune, United States - 6 hours ago
Here are tips from security experts: Avoid credit card solicitations. This is a good idea anyway to stay out of debt. But there's a scarier reason to avoid ...
Limit damage after ID theft Sun-Sentinel.com
Identity Theft Solution Corsavoo.com
What I learned when thieves stole my identity Sun-Sentinel.com
all 5 news articles

Do politicians deserve job credit?
The Jackson Citizen Patriot - MLive.com, MI - 2 hours ago
And no region is immune from politicians taking credit for jobs created in recent years. But whether those politicians can legitimately claim credit is ...

Federal housing tax credit has mixed benefits
Indianapolis Star, United States - Sep 5, 2008
By Jeff Swiatek At Carpenter Realtors in the Indianapolis area, agents wear lapel buttons proclaiming, "Ask me about the $7500 tax credit. ...
Plenty to Coax Home Buyers Back To the Market Washington Post
all 2 news articles

Wind Chimes and more...

Windchimes for great gifts!

Credit Cards: What is the Universal Default Clause?