Establish a good credit history

Advice provided by Marc Hébert, founder of The Harbor Group Inc. The company is a registered investment adviser. If you have any financial questions or would like to suggest a future topic, email [email protected] You may have heard the term “establishing a credit history,” but what exactly does it mean? What is credit? Credit generally refers to the ability of a consumer to obtain goods or services before payment based on the confidence that payment will be made in the future. People seek credit for a variety of reasons. You may be moving into your first apartment and need some furniture. Maybe you have an unexpected expense, like the death of your car’s engine (by the way, that’s also the reason to have an emergency stash). You may need credit because you don’t have quick access to money. Using credit wisely can help you improve the quality of your life, overcome financial difficulties and deal effectively with emergencies. Each time you make a purchase on credit, you are trusted to make the final payment at some point in the future. Each time you pay the lender, the more likely the lender is to want to do business with you again in the future. After all, you paid as you agreed. Some lenders report their activities to major credit reporting agencies. With this, your habits can be brought to the attention of potential creditors in the form of a credit report. That’s what establishing good credit means. This report will be available for other lenders to review. If you don’t pay as agreed, well, the lender is less likely to want your business. If the lender decides to offer you credit, you will often have to pay more in terms of a higher interest rate. Continuing to not pay your bills or paying them late every time will eventually establish you as a bad credit risk. Negative activity will also be reported to credit reporting agencies. It’s not a reputation you want to have. So how do you get a good credit reputation? Here are some tips to get you started: First, get an income. Lenders like to see some kind of continuous and predictable cash flow. Without cash flow, those regular payments that lenders enjoy may simply not be possible. Start by borrowing a small amount. If you start small, a lender’s exposure to losses is not as great. They may be more willing to lend you small amounts. Maybe you could initially ask for $400. Pay it off quickly, then apply for another, slightly larger loan. Pay this one quickly too. By borrowing and paying back quickly, you’ll end up having a strong credit relationship with that lender. If it’s a lender that reports to a credit reporting agency, the positive activity will be flagged on your credit report. This will allow other potential lenders to see that you represent a good credit risk. Another option is to choose a credit card with a low credit limit. Sometimes major credit card companies offer small lines of credit to groups, such as members of credit unions. If you belong to the group, consider getting a card, using it, and again, paying it off quickly. This activity will appear on your credit report. Many retail stores will issue payment cards. If you do make a purchase anyway, consider signing up for a card. Just be aware that this interest rate may be high and the credit limit low. As with any credit, use it responsibly. Another suggestion is to make a large down payment. If you’re making a major purchase, like a car, consider saving up and putting down a large down payment. Since the amount you will borrow is less, the lender may be more inclined to lend you money.

Advice offered by Marc Hébert, founder of The Harbor Group Inc. The company is a registered investment advise. If you have questions about finances or if you want to suggest a future topic, email [email protected]

You may have heard the term “establishing a credit history,” but what exactly does it mean? What is credit? Credit generally refers to the ability of a consumer to obtain goods or services before payment based on the confidence that payment will be made in the future.

People apply for credit for a variety of reasons. You may be moving into your first apartment and need some furniture. Maybe you have an unexpected expense, like the death of your car’s engine (by the way, that’s also the reason to have an emergency stash).

You may need credit because you don’t have quick access to money. Using credit wisely can help you improve the quality of your life, overcome financial difficulties and deal effectively with emergencies.

Each time you make a purchase on credit, you are trusted to make the final payment at some point in the future. Each time you pay the lender, the more likely the lender is to want to do business with you again in the future. After all, you paid as you agreed.

Some lenders report their activities to major credit reporting agencies. With this, your habits can be brought to the attention of potential creditors in the form of a credit report. That’s what establishing good credit means. This report will be available for other lenders to review.

If you don’t pay as agreed, well, the lender is less likely to want your business. If the lender decides to offer you credit, you will often have to pay more in terms of a higher interest rate. Continuing to not pay your bills or paying them late every time will eventually establish you as a bad credit risk. Negative activity will also be reported to credit reporting agencies. It’s not a reputation you want to have.

So how do you get a good credit reputation? Here are some tips to help you get started:

First, get an income. Lenders like to see some kind of continuous and predictable cash flow. Without cash flow, those regular payments that lenders enjoy may simply not be possible.

Start by borrowing a small amount. If you start small, a lender’s exposure to losses is not as great. They may be more willing to lend you small amounts. Maybe you could initially ask for $400. Pay it off quickly, then apply for another, slightly larger loan. Pay this one quickly too. By borrowing and paying back quickly, you’ll end up having a strong credit relationship with that lender.

If it’s a lender that reports to a credit reporting agency, the positive activity will be flagged on your credit report. This will allow other potential lenders to see that you represent a good credit risk.

Another option is to choose a credit card with a low credit limit. Sometimes major credit card companies offer small lines of credit to groups, such as members of credit unions. If you belong to the group, consider getting a card, using it, and again, paying it off quickly. This activity will appear on your credit report.

Many retail stores will issue payment cards. If you do make a purchase anyway, consider signing up for a card. Just be aware that this interest rate may be high and the credit limit low. As with any credit, use it responsibly.

Another suggestion is to make a large down payment. If you’re making a major purchase, like a car, consider saving up and putting down a large down payment. Since the amount you will borrow is less, the lender may be more inclined to lend you money.

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