Credit history determines the creditworthiness of a person. Having no credit history will put the lenders in a fix. When you are applying for a credit card or a loan without having credit history to your backing, lenders will not be able to decide whether you will repay your debts on time or if you are a consistent defaulter. As a result, your requests will be either rejected or you will be given high interest rates in order to make up for the risk that the lender is taking. In order to avoid such circumstances, it is important to build credit history at the earliest. Here are some ways in which you can start building a good credit history.
First of all, you need a credit card to start building credit history. But, with no credit history to your name you are going to find it tough to get a regular credit card. You may have to settle for student credit cards, if you are still in high school or college, or you may have to opt for secured credit cards. Banks are willing to offer secured cards for people without a credit history because the risk involved is minimal. The applicant will have to pay a deposit upfront to the bank before the bank issues the card.
The available limit on the secured credit card is either equal to or less than the amount paid as deposit for getting the card.
Once you get the card, it is easy to go overboard with the spending. But, if you want to build a good credit history, you will have to be very careful before you swipe your card for purchases. Before you use the card to pay for the products, determine if the items are essential to your survival. If it can wait for a while, then put off buying the product until you have some cash on hand.
Another important thing to keep in mind when you plan to build good credit history is to pay all your bills on time. Irrespective of whether they are utility bills, credit card bills or loans, it is imperative to pay them off on time to work your way from no credit history to good credit history. Only then, will the lenders consider you to be worthy of further credit. They will be willing to offer cards and loans at interest rates that are highly competitive, thus making it easy on your pocket.