Could some please explain a little about establishing good credit?

Question

I really don't understand credit scores --- I don't have a credit card or anything -- could some please explain a little about establishing good credit -- what's a good credit score and all that stuff -- thanks

the only type of card I own is an Instant Cash Card but I haven't activated it yet...

Answer 1

I wrote 2 articles on how to evaluate your score and how to establish good credit.

Hope this helps:

Answer 2

Credit score is the system in which creditors use to determine if your a credit risk or not...the lower the score...the less chance you have of getting a loan or buying a house..etc. establishing a good credit rating (over 700) will help you get better interest rates when you purchase a house or a vehicle or anything you buy on credit. I would suggest you start small...Apply for a credit card from your local back. Make small charges, and pay the balance off monthly. This will begin to establish your credit score. When your credit becomes established, you'll probably start receiving credit card offers in the mail....WATCH THE FINE PRINT! Some of them will charge high interest rates, some will even charge an activation fee, a monthly fee in addition to interest, or an annual fee.....check out the daveramsey website the other answer listed....your credit score is established by making payments on time! so, don't be late!!

Answer 3

Your credit score is a number that is made up by the various credit reporting agencies. it is largely subjective and based on guesses and patterns.

The idea is that they can look at your credit history and change it to a score that other people in the business of offering credit can read and understand.

Every time you borrow money in any way, you have obtained credit. The credit score is largely a guess at how well you'll pay it back.

Pay a decent amount ON TIME every month- not the minimum, but not totally paid off and you'll get a good score. Every month you keep this up, the score will improve.

Get a lump sum of cash from somewhere and pay a bigger loan off? The score will drop a bit because so many people who do this go on to get in credit trouble later (the classic lottery winner who then looses everything and goes into bankruptcy is an extreme example.) A lot of odd events hurt your score- taking out a credit card without using it, for example. Asking about several loans without taking any out and so on can as well.

Late payments hurt the score badly, but the numbers come back every month it is back on track. Rouhgly 6 months later, the late payment is forgotten if the others were on time.

While it is easy to hurt your credit score, there is really only one thing you can do to help it- take out a loan and pay it off in a timely fashion.

We can use this to help build our own credit by getting a small bank loan and paying it off over time (ideally being able to pay it back in full at any time.) Using store credit for something you can pay for out of pocket will help also.

(Just be careful of the 'no interest' trap. If they say '1 year pay no interest', the interest starts collecting the day you buy it- and if you pay it off in that year, you owe no interest. At 1 year and 1 day, however, ALL of the accumulated interest is now due!)

Credit cards do not help you in any special way, and can hurt you in a lot of ways. Go ahead and use them if you must, but do some research on the 'smart ways' to use them.

Answer 4

Basically, credit scores work this way. The more debt you have compared to your credit line, the lower your score. Let's say you have a credit card with a $5,000 limit. You have $4,999 on your card. Your credit score will be lower than someone who has the same credit line with $100 on the card. Other things factor in too, like whether you overdraw your checking account regularly, if you've ever been reported to a collection agency for payment of bill, things like that. In order to get a good credit rating, make sure you pay down your credit lines as much you can. Double payments are useful for getting back on track.

Answer 5

It's good to establish credit but don't overdo. Open up one major credit card like Visa, American Express or MasterCard and make sure you pay the entire balance as soon as you can by making the minimum payments on time each month. You need credit when you travel to hold a hotel, rent a car, etc. One credit card is good to have in an emergency like car repair, etc.

Answer 6

A credit score is basically a measure of how much debt you actually have vs. how much debt "they" think you're capable of sustaining (where "they" is whoever calculates these things).

To put it into more concrete terms, if you have three credit cards with a total credit limit of $2500 but you only have a balance of $10, then you have $2490 in credit available. If you owe the same $10 but only have one credit card, with a credit limit of $100, then your available credit is $90. Obviously, the former situation will result in a higher credit rating.

Calculating credit scores is actually a lot more complicated than that, and I'm not sure if all parts are even made public. But to get a good credit score, basically you need to show that you're capable of sustaining more debt than you actually have.

Answer 7

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. (and they're named after their inventor!). Your FICO score is between 350 (high risk) and 850 (low risk).

Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. In fact, the fact they don't consider demographic factors is why they were invented in the first place. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed as a way to consider only what was relevant to somebody's willingness to repay a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Different portions of your credit history are given different weights. Thirty-five percent of your FICO score is based on your specific payment history. Thirty percent is your current level of indebtedness. Fifteen percent each is the time your open credit has been in use (ten year old accounts are good, six month old ones aren't as good) and types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards). Finally, five percent is pursuit of new credit -- credit scores requested.

Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score.

You can also read my article on the subject of Credit Scoring & Credit Repair. http://users.search-o-rama.com/Article106293.htm

Answer 8

i replace into the comparable way in my 20s. as quickly as I became 30, i offered homestead and the internal maximum loan company did a credit examine and advised me what I had to pay off before i could desire to get a private loan (there replace into $500-$six hundred nicely worth of previous costs and stuff.) there replace into additionally a lot of previous funds owed that i replace into in a position to jot down a letter explaining why i replace into no longer able to pay, rather of having to pay them. homestead possession does wonders to your credit. I definitely have fantastically much a seven hundred score now. additionally, merely making customary money on your credit enjoying cards enables your credit, in time they'll supply up finding on the type you utilize to regulate your funds and the type you do NOW.

Answer 9

Go out to myFico.com and take a look at "Understanding your FICO score".The process of looking at credit has basically been boiled down into a number, which decides if you are a good risk or not.

http://www.myfico.com/Downloads/Files/myFICO_UYFS_Booklet.pdf

Answer 10

http://www.daveramsey.com
This guy is GOOD!
You can find the station in your area or listen online.
He wants you to win!