The most commonly asked question by most consumers looking to open a credit account is that "How do I establish credit, when I don't have a credit history?" Not having credit can be just as difficult as having bad credit unless you know how to go about proving yourself to a potential creditor.
Places for Getting Letter Of Credit
A good place to start is by obtaining a letter of credit from a company that you have been dealing with already that does not report to the credit reporting agencies.
An example would be your electric company. It is possible to request a letter of credit from electric company by contacting them. They are likely to require that you have had an account with them for at least a year as with most companies that you are asking for a letter of credit.
Another option for a letter of recommendation for credit is your cable company. If you have had an open account for at least a year and have made on time monthly full payments, without payment arrangements, these two companies are good candidates to provide you with a letter of recommendation for credit.
You could also start with your banking institution to establish credit either with or without a letter of recommendation for credit. All banks offer credit card and loan accounts. If you have banked with the institution for at least a year they may strongly consider extending you a line of credit.
Credit Accounts
Your interest rate may be high in the beginning of any credit account, but doesn't despair, after your first positive review in about 6 months; the interest rate may fall dramatically as well as your payments if you have been making minimum payments.
Just to get you started. Your new account may be very low. Your lender may review your account for a larger credit line after about 6 months of on time payments. The smartest method is to start with baby steps.
Start with just a small account, pay the accounts regularly, get used to the monthly obligation, and make on time monthly payments before jumping into any other credit account(s).
You are very likely going to find creditors coming out of the wood work and hunting you down to offer you a line of credit, consider their offers with caution.
In fact, the best recommendation is to give your self at least 6 months to a year before taking on a new account. Jumping in too fast can easily wipe out all of the hard work you have done so far to establish credit.
Keep Track of Your Credit Rating
It is vital that you keep track of your own credit rating once you jump on the credit bandwagon. You will find many great offers online for programs that can inform you, on a regular basis, of your credit standings. You could also request your free annual credit report and verify your status regularly.
Keeping track of your credit report once your credit becomes active is crucial for many reasons:
- It could prevent the use of a fraudulent credit account by an unknown user.
- It could prevent the unfortunate event of somebody stealing your identity and using your credit.
- It could help find a lost payment and assist you with keeping track of how your creditor is reporting your payment activity.
- It is just good credit etiquette to know your own credit rating.
- Knowing your own credit rating and status gives you bartering power when dealing with a new potential creditor.
Once you've established some credit, take caution with accepting credit offers from other creditors, look into the interest rate the lenders are offering, consider the monthly obligation in addition to your other financial responsibilities such as rent, utility bills, car insurance, groceries, gas, laundry expenses, day care, etc., and feel free to decline credit offers.
It can be very exciting to have several creditors offering advances in the beginning of your adventure with new credit accounts, it can be an uplifting and powerful event, however, pursue with caution in order to maintain a healthy credit rating and score. Keep your credit history in mind and respect the great task that you have accomplished by establishing credit with caution.
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