Having credit is extremely important to get many of your needs and wants in life. When it comes to getting a home, a car, or a loan, lenders when look at your credit history to decide if you are likely to repay the money to them. Your credit history will essentially determine your credit score, and your credit score will determine if you are able to secure loans and if you are able to get a good rate for the loans.
Regardless of whether you are attempting to get a mortgage, credit card, or new car, your credit is extremely important. When it comes to getting the best terms for different financial products, listed below are the things that you need to know to build good credit.
Size of your credit
Credit scores are based on the history in your credit report. If you do not have much credit history, then you will not be able to be assigned a credit score. The Consumer Financial Protection Bureau calls this credit invisibility. If an individual has not had enough credit history to generate a credit score, then this person is considered to be credit invisible. With no credit history, you may not be able to get the loan that you need or want. Things as simple as getting a credit card will be difficult without credit history.
How long to build credit
Fortunately, it does not take long to build a credit history. Usually, it will take a few months to six months to develop credit history that will result in a credit score. Your credit history will be dependent on the number of loans that you accumulate during these months. One type of loan is a credit card, and it is the quickest and easiest way to build your credit history. Even if you end up with a small credit limit, you can still build a credit history with a credit card. With credit cards, the banks report your information to the credit bureaus each month. Therefore, your credit history can be generated based on the information that is reported to them.
Establishing Good Credit
Although it will only take a few months to establish credit, it is important to make sure that you establish a good credit history. The best ways to do this are to pay your bills on time each month, keep your overall balance low, and do not apply for too many loans within a short time period.
Credit is extremely important. If you do not have a credit history, you should take the time to apply for a loan or credit card. Once you have been approved for either, you will be on your way to establishing credit.