What Do You Need to Establish Credit for the First Time?
(2 of 7)
What Do You Need to Establish Credit for the First Time?
Any lender that would extend credit to you wants to know that you are a good bet. If you have never had credit, there are other things about you that lenders can use to make a judgment about your creditworthiness. Let’s examine a few:
Things To Know
- Job history, utility bills, and other events in your life tell lenders about your creditworthiness.
- Bottom line: establish a strong history of being dependable, stable, and on time.
Your job history
If you can hold a steady job, you will be attractive to lenders. Are there periods of unemployment in your job history? Do you change jobs frequently or get fired a lot? Keep your employment history in mind not only now but for the rest of your life, because it is an important factor.
Your housing history
Do you move a lot? Moving a lot, such as every year or more frequently, can send out a red flag to a lender. It can indicate that you have trouble with your finances. Your addresses are a part of your credit record. Aim for stable residency as best you can. Also, if you have any ownership in your home, that will look good to lenders.
Your bank accounts
Do you have a checking or deposit account at a bank or credit union? If so, your account history can play a role in whether you get a credit card for your first time, even though it won’t be reported to the credit bureaus. If it is in good standing—for example, you don’t overdraw on it—that is a plus for you. A well-managed bank account indicates to lenders that you are good at managing credit. Also, if you are in good standing with your financial institution, consider applying for your first credit card there.
Utility bills you pay
If you pay a telephone bill, an electric bill, cable bill, or something similar, lenders want to see that. Be sure you are paying them on time and not defaulting on them. It especially pays to have these bills established in your name.
Medical bills
If you have any outstanding medical bills, work on paying them off. Not all medical institutions report these debts to credit bureaus, but it’s best to play it safe and assume they do.
The bottom line is, establish a strong history of being dependable, stable, and able to pay your bills on time. Lenders want to know that you are going to pay them back if they extend credit to you.