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How to Build Your Credit History

One of the most important things that you can do to enhance your financial situation is to build a good credit history.  For those that are just starting out and are interested in establishing credit there are a few things that you should know in order to not only establish credit, but ensure that your credit rating will be high-quality.

Establishing credit is usually quite simple.  Most adults start building credit when they leave for college.  Since students are on their own, they may need the help of a safety net, in this case a credit card in case of an emergency. Credit card applications are easily available at practically all college campuses and in most cases you will see at least 10 offers for credit in your few weeks of school. 
A credit card is a great way to establish credit.  It should be noted that you only need one credit card, anything more than one is overkill and won’t necessarily help you build credit and in most cases will help you fall into debt.  Since there are plenty of offers for credit cards, make sure that you read the fine print of each offer and choose the best card that fits your specific situation. 

If you rather forgo a credit card, you can also build credit by taking out a small loan or a car loan.  In many cases, if it is your first time taking out a loan, you will need a co-signer which will usually be a parent.  Small loans and car loans are a great way to establish credit, because they last for a couple of years and can give other banks and lending institutions a good idea on how you pay your debts over a long period of time.

One misconception of establishing your credit history is that you need to have lots of credit cards and that you need to owe lots of money.  In fact, this can actually hinder your credit rating.  While one or two credit cards are seen as practical, more than that and banks can start to shy away from you. 

Regarding the amount of debt you owe, this will obviously be in relation to your income.  If you have a good job and are making a relatively good living, then a couple of thousand dollars in debt is ok.  However, if you are a college student and are already in debt for a few thousand dollars, credit companies can rate you as a credit risk – even if you pay all your debts on time.