How to Establish Credit: When you have little or no credit history, applying for loans and credit can be difficult, if not impossible. Lenders like to see a record of payment history and a current credit score before they extend credit or loans. This information also helps them determine what interest rate to offer.
If you are looking to establish credit for the first time, lenders can’t look to your credit score to decide whether or not to lend you money. In these situations, they have to examine other factors that can help them decide if you are a good credit risk or not.
Here are basic guidelines to follow to establish or re-establish your credit:
Establishing a good credit history takes time. There are no shortcuts or tricks that can take you from no credit at all to a high score in a matter of months. Remember—your credit score is based on a number of factors such as payment history, length of time you’ve had credit, how much you owe, and much more.
Here are a few “don'ts” to keep in mind: