The Credit ABCs: How to Establish Good Credit

How to Establish Good Credit

Over the years I’ve had many clients come to me without credit scores, wanting to know how to establish good credit quickly. Unfortunately, without credit scores it can be hard to obtain a mortgage, a car loan, or any type of loan. The good news is, establishing credit is easy, and it only takes a few months to get going. Here are the three tips I always give my clients:

Tips to Get Started

1. You have to start somewhere! Open a credit card. This can be a gas card, a small general credit card, or a department store card.  Once you open a card, or even two or three, use them every month. Make sure you put on a balance (but not over 50% of the limit), and then pay it off completely at the end of that month.

2. Diversify your credit. As soon as you are able, move on to another type of credit, such as a car loan or other installment loan. If you need a student loan, that is another good option. You want to diversify your credit with a different sort of account.

3. Continue building your credit. If you are able to open yet another type of credit, such as a mortgage, or other type of loan, your credit will be built further. Multiple credit cards are also a good idea, and once you’ve established them for at least a year, no need to charge them every month. The longer you have the accounts, the more they’ll help your credit. Finally, be very careful about any sort of collection or judgment. Those derogatory reports can sink your credit in an instant.