Do you often wonder “Why is it important to build a credit history”? Whenever you request for a loan, usually the lenders/creditors check your credit score to assess the terms and conditions on your loan. So, usually, you need to have a credit score in order to take out a loan. Go through this article to know why you should build a credit history and how you can build it from scratch.

Building a credit history – Why it is important

As already mentioned, you should have a credit score in order to take out a loan such as, a mortgage, car loan, credit card, etc. By checking your score, the lenders can assess whether or not you can manage your loans and personal finances responsibly. So, you should have a credit profile to prove your creditworthiness. While trying to build a credit score, it is required to know that you should have credit accounts for at least 6 months to get a credit score. So, you should start building a credit history right from young age. It will help you build a long credit history which is favorable for achieving a good credit score.

Building a credit history – How to do it

Do you know that you may have to pay higher insurance premiums if your credit score is not good? Yes, it is true. So, while building a credit history from scratch, your intention should be on building an impressive credit profile that helps you qualify for loans and that too, on terms and conditions most favorable to you.

You can follow these ways to build a credit history from scratch.

• Get a secured credit card – To get a secured credit card, you’ll have to deposit an amount with a creditor/lender or a bank. The deposited amount will be your credit limit. You can build a good credit history if you use this card for making small purchases and paying back the amount at every billing cycle.

• Get a co-signer – You can get your first credit card co-signed by a person who has a good credit history. By doing so, the co-signer takes the responsibility to pay back the loan in case you default on making the payments on time.

• Opt for a department store card – The department stores offer charge cards which is relatively easier to obtain. So, you can get such a card and manage it responsibly. It will show that you can manage credit well.

To build a good credit history, it is very much required that you pay your bills on time. After you have established a credit history, you should monitor your credit reports at regular intervals to make sure that there aren’t any erroneous information. If required, dispute with the bureaus to fix errors. These will help you build a good credit history and in turn, have a good credit score.