Your
credit rating can make or break you when it comes to financial
decisions being made about you. Back in our grandparent’s
day business was conducted in cash and a handshake was all the
credit you needed but today you have got to have a good credit
history and good credit rating if you want to obtain the best
interest rates or credit in the amounts you might need for an
emergency. If you have no reported credit history and a low
credit rating lenders are likely to consider you “high
risk”. This is because there is no past record for them
to look back on. It’s kind of like applying for a job.
If you apply for a position higher up in the company but have
no previous on-the-job experience, they aren’t likely to
hire you but if you apply for an entry-level job and work your
way up…. You get the point.
Certain
types of people have more problems getting a good credit rating
than others. Generally, young people just starting their careers,
older people who’ve always paid cash, and divorced or
widowed women tend to have more problems than others. There
credit rating is often lower.
The
first thing to do is to find out what’s in your credit
file. Sometimes errors can be reported or there can be some
reports that you didn’t realize would show up or that
you had forgotten were there. A bad report will hurt your
credit rating. Make sure, if you’ve had a different name
or lived in a different location, that those past records
were merged with your current record. Also, if you shared
accounts with a former spouse, ask the credit bureau to list
these accounts under your name as well. Many will perform
these services for a small fee.
Remember
that creditors are not required to report any account history
information to the credit bureaus. However, if you have a
joint account and the creditor does report it - it must
be reported under both your names under the Equal Credit Opportunity
Act. The best way to make sure this is done is to contact
your creditor in writing (make sure to include account numbers
and keep a copy).
If
you do not have a credit history (or have a sparse one), you
should start to work on one immediately. First, you must have
a steady income and should live in the same area for at least
a year. Then you can try applying for credit with a local
department store or applying for a small loan amount from
your bank. Often a local department store or bank will approve
credit applications when larger ones will reject them due
to a lack of credit history. Most importantly, before you
apply, ask if they report credit history information to credit
bureaus. If at all possible, you should strive to obtain credit
that will be reported, as this will build your credit history
and give you a good credit rating.
If
you are rejected ask for the reason why. There are often other
reasons for a denial than lack of a credit history or a low
credit rating. For instance, your income may not meet the
minimum or you may not have worked at your current job long
enough. You can usually solve these problems with time or
by simply applying with another creditor. In almost all cases,
it is best to wait at least 6 months before making each new
application because credit bureaus record every inquiry about
you and inquiries can damage your credit by making it look
like you are trying to obtain too much credit too quickly.
If
you still are having problems developing credit and getting
a good credit rating, you may want to ask a person who has
an established credit history to act as your cosigner. A cosigner
guarantees that you’ll pay and that if you don’t
- they will. This makes you look like a better risk for
creditors. Once you have paid off this debt, try again to
get credit on your own.
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