Building your credit history from scratch

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Building your credit history
3 years ago
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It's a frustration that every young person faces when he or she tries to get a loan the first time. Until you have borrowed money and repaid it, lenders are very hesitant to loan money to you. Of course, you can't repay a loan until someone loans you money. That's why it's so important to take steps toward building your credit history before you try to buy a car, home, or make other types of major purchases.

1. Make Responsible Financial Decisions
When you're just starting out with building a credit history, it's important to keep in mind that every financial decision you make has the potential to impact your credit history.

If your credit report shows bad checks or late payments on any type of accounts, your credit score will be affected. It's very important to make responsible decisions about your bank accounts and all financial obligations, so that you don't have to worry about negatives showing up on your credit report.

2. Open and Repay Small Loans
It is sometimes possible for individuals without an established credit history to take out loans for small purchases. Many retail establishments offer guaranteed acceptance financing on consumer electronics products.

Even if you have enough money to pay for your new stereo or computer, it can be a good idea to take advantage of store financing if you qualify. When you repay these types of loans as scheduled, you are taking steps toward building a good credit history for yourself.

3. Borrow with a Co-Borrower
If you have a family member or friend who is willing to cosign a loan for you, this can be an excellent way to build your own credit. Since the loan is in your name, your payment history will count toward building your own credit. Of course, the person who cosigns for you will have to have a positive credit history in order to be approved.

Don't lose sight of the fact that the best, and only, way to establish a good credit history is to be financially responsible. Just as every financial obligation that you repay properly will help build high credit rating, every late payment that you make will hurt your credit score.
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