How to Start Building Credit and Enjoy the Benefits

Building credit goes beyond just acquiring a few credit cards. Bank accounts, loans and credit-reporting practices all play a role in helping people build good credit histories. Many of the benefits you get as you build credit aren't immediate because the longer you maintain credit accounts in good standing, the more benefits you gain. However, you can temporarily enjoy your credit-card purchases free of charge and not pay interest charges if you carefully manage your accounts.

Instructions

1

Open a checking and savings account to demonstrate to potential creditors that you have the ability to manage financial accounts. Include your checking and savings accounts on credit card applications, which usually have a space for applicants to list their bank accounts.

2

Apply for a department store or gasoline credit card first, because they're usually easier for people with no credit history to qualify for than bank cards. Call the customer service number on the credit card application before applying to find out if the creditor reports customers' account activity to the major credit bureaus, which are Equifax, Experian and TransUnion. Don't apply for a card with a creditor who doesn't report to the bureaus. Pay your bill on time for any card you receive to avoid having a creditor report late payments to the bureaus that will lower your credit score.

3

Get a secured credit card if you can't qualify for other types of cards. Consider that secured card issuers require applicants to put money into a savings account that serves as a security deposit for the account, and the amount deposited is usually equal to the cardholder's credit line. Look for a company that will convert your secured card to an unsecured card after you establish a good credit history with the company. Again, ensure that the card issuer reports account activity to the three major credit bureaus before you open an account.

4

Try to get a small personal loan at the bank where you opened a checking and savings account. Make timely payments on the loan to help boost your credit rating, which partly depends on having different types of accounts. For example, consider that you can improve about 10 percent of your FICO credit score if you have loans and credit accounts in good standing.

5

Use your creditor's grace period to your advantage for any accounts you open by paying off charges each month to avoid accumulating interest charges. Bear in mind that this allows you to use your purchases for about 30 days free of charge before you have to pay your creditor. Improve your chances for getting auto and home loans as you build a good credit history. Get low-interest loan offers from lenders who reserve their best rates for loan applicants who have top-notch credit ratings.