How to Build Up Credit

Building up credit is an essential part of financial survival, but is very difficult to do if you have no credit history or bad credit. In either situation personal loans can be very difficult, and even impossible to maintain. By following the steps below you can learn how to build a credit history and re-build bad credit.

Instructions

1. Open a checking and savings account. Lenders view bank accounts as a sign of financial stability and will help you build up credit

2. Apply for a credit card or secured credit card. Secured credit cards are good for individuals with bad credit histories. All you need to do is place a deposit on the credit card before it can be used. This serves as a back-up to the lender if you decide not to repay.

3. Build credit when you are young. It is easier to establish a credit history when you are teenager, but it is easy to ruin by poor spending and saving habits. Make sure if your teenager gets a credit card to build credit they are careful with its usage and make payments on time. Otherwise you (or your teen) can negatively influence your credit score.

4. Only keep one or two credit cards on hand. Remember, you are trying to build or rebuild your credit. If you have more than one or two credit cards you may appear to be a financial risk to lenders rather than someone who is attempting to build credit. The more credit cards you have, the greater the risk financial institutions assign to you and your credit score.

5. Paying off past and overdue debt is another method of building credit. Once the debit is paid in full it is reflected on your credit score. Also, lenders will see you are attempting to change any bad past financial decisions.

6. Apply for a small loan. The loan can be for any amount; just make sure the repayment time is no longer than a year or two. Once it is repaid in full it will reflect on your credit history and credit score.