When credit cards first came into use, they were something of a novelty. Little did the original issuers or users realize that credit cards would become such a vital part of daily business and personal money management–just imagine trying to purchase airline tickets or make hotel reservations in a distant city with a personal check!
Because the ability to use credit is such a big part of every day transactions, it is essential that you know how to establish credit, maintain a good credit rating, and repair a damaged credit history.
Most young adults should establish a credit history when they start working. One of the best ways to do this is to start with one low-cost bank card which has a low credit limit. While lenders cannot discriminate on the basis of sex, race, or national origin, they can ask about your income, job history, and other matters that may affect your ability to repay a loan.
Young adults are not the only ones with a need to establish a credit history. Married couples often have joint accounts, and divorce or the death of a spouse can create a need for re- establishing credit. Therefore, it is a good idea for both spouses to establish individual credit histories before events such as death or divorce occur. If you are divorced or widowed, you should report your new status to all your credit card issuers and establish credit in your own name, if you have not already done so.
Maintaining a Good Credit Rating
A credit line is made available based on your ability to repay the amounts borrowed. Maintaining a good credit rating is simply a matter of keeping your end of the bargain–that is, making scheduled payments on time. People get into trouble when they borrow (charge) more than they should–that is, when they can’t meet even minimal monthly payments and fall behind.
Repairing a Damaged Record
Mistakes sometimes show up on a credit record. Those made by a credit bureau are usually easier to correct than those made by a merchant–when the bureau checks with the store, it may report the same incorrect information again. Getting this type of mistake corrected can sometimes be frustrating and time- consuming.
However, unsatisfactory credit records can be the result of credit card abuse by users. If this is the case, it will be up to you to clean up your act. Here’s what you can do:
- Pay off overdue bills–they won’t just disappear.
- Begin making payments on time–reestablish your trustworthiness.
- Get rid of cards you’re not using–if you’re spending has spun out of control, get rid of all your cards (for awhile).
Credit means convenience, but it is a convenience that should not be taken lightly. At some point, many of us will want to borrow for some “big ticket” items such as a car, a home, or to help finance a child’s education. And, those are precisely the times when a bad credit rating could become a big headache. So, make your own history-use credit wisely, and keep your record clean!