How to Establishing & Protecting Good Credit
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Know yourself, get your attitudes and behavior under control, and then use the author's formulas and action steps to wrestle your credit report, account by account, back into something respectable. |
Rich Dad's Advisors: Turn Bad Debt into Good Debt and Bad Credit into Good CreditMany people claim they will never need to use credit in order to obtain the goods and services they need, but credit is necessary unless a person is financially well off and can pay cash for everything. The average person cannot obtain a home or a new vehicle without making monthly payments. It would be ideal to never have to pay interest in order to obtain the luxuries and necessities of life, but few are able to do so. You may think you’ll never need credit, but you may find yourself unable to buy what you want if you haven’t established and maintained a good credit history.
If you want to establish credit, one of the ways of doing so is with a credit card account. Some credit card companies are willing to take a chance on a new customer, and offer a small credit line to those who have yet to establish credit. The easiest credit cards to obtain are department store cards and service station cards. They are however not as valuable in the eyes of credit reporting agencies. Even if you always remit the required payment on time, your credit score won’t improve as much as if the major credit card companies such as Visa or MasterCard issued the cards. Try to obtain a small line of credit with one of the major credit card companies, but keep in mind that every time you apply for credit and are turned down, this information ends up on your credit report, even if you haven’t established credit. This can become a vicious circle that is sometimes difficult to break into.
Some credit cards are considered secured, which means you must maintain a savings account to secure the balance of the card in case you default on the payment. These types of cards are useful if the issuing company doesn’t inform credit-reporting agencies that the account is secure. If the card is reported as being secure, your credit score will actually become damaged instead of improved. Avoid secure credit card accounts if at all possible, or at the very least, find out what the company policy is regarding sharing information about the account.
If you are in need of new furniture, appliances, or electronics, you can begin establishing credit by shopping at a rent-to-own store. Items sold in rent-to-own stores are often more expensive than other retailers, but this is sometimes the only way people without credit can obtain items such as these. Not only will you get the items you desire; you’ll be establishing good credit when you pay the monthly amount due on time, every time.
Some stores, such as carpeting and flooring stores, offer credit accounts to their customers. Carpeting and flooring is rather expensive, so credit customers are important to the success of a business such as this. It is for this reason that this type of credit is relatively easy to obtain. Improving your home by purchasing new flooring is a great way to begin establishing credit.
Once your credit has been established, it’s of the utmost importance to maintain good credit by paying your bills on time. Everyone makes mistakes and forgets to pay a bill now and then, but if you pay a bill more than 30 days late, chances are it will be reported to the major credit bureaus. Make a habit of paying your bills late, and your credit score will take a major nosedive.
Don’t let your credit get out of control. People often make the mistake of overextending themselves, and they become buried by credit card debt. Use your credit wisely, and it will be there for you when you need it.
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