How To Build A Good Credit Rating

From bartering in the olden days, to metal coinage, to paper currency, the most recent stage and development in the evolution of currency is credit and credit ratings. With rising ease and usage of the internet, and e-commerce, electronic transfers and so-called "plastic currency" is quickly substituting cash.

The way in which credit works is that it is a record of your spending and borrowing habits, and is used to determine in an effective manner, how honest/reliable you are with a particular transaction, will you be likely to make payments on time, or be not able to pay promptly, if certainly at all?  Even as this is a straightforward mechanism to protect retailers from debt and bad creditors, it could be overly harsh, catching people a bit unfairly meaning they would not able to buy things, or buy them at a generous interest rate.  For this reason, it is very important that you keep a clean and positive credit rating.  As a side note, no reputation is as bad as a negative reputation, after all, if there is no history or record of your credit transactions, how else will lenders be able to know you are worth the risk and effort? 

Strange as it may appear, you have to buy credit in an attempt to get your first (critical) step on the credit rating ladder.  Think of it like Ebay with its feedback system, when you establish yourself with small, minor transactions, then the bigger items will be much more available.  A very good way to start building credit is by opening a savings bank account, this is a big plus with lenders, and the bank in question might even offer you a credit card.  If you do get a credit card, be sure to pay off any and all debts and exceptional charges before the due date.  This will avoid you getting hit with penalty charges and also it would be great for increasing your credit rating, since it demonstrates that you are a prompt customer. 

Use retailer programs, so for any large purchase, which offers installments of a monthly fixed amount spread over an agreed period of time are a good way to increase your credit score.  Just ensure the retailer in question will actually reward you for your work by reporting your loan (or installment payments) to the major credit bureaus. 

For a shortcut, get a co-signer for any loans you take out.  By doing this, you will be able to take advantage of their credit score, and will also provide the lenders with an additional assurance that if you’re unable to pay, then payment can be recovered from the co-signer.  Note that this is double-edged sword, even as you get the benefit of the co-signers good reputation, they will bear the brunt of your bad reputation if you fail to keep up with payments or in general default.  If you are going to be a co-signer for somebody, be really careful and draw up a clear strategy to keep away from getting a bum deal. 

Remember you're legally entitled to access your credit report at anytime, and this could give you a clearer idea as to what areas you need to improve upon to increase your declining credit score.