How to establish credit history

Between credit history and getting a credit, it is a catch 22 situation. Without credit history one cannot get a credit, but to build a credit history, one has to start with a credit! Steps to create credit history for oneself is given below:

1. Check the credit report for any errors. Good credit report enhances the lender's confidence of getting repayments on time.

2. Even with good credit report, if credit is turned down, one can get a copy of the credit report to know why.

3. Get a copy to the credit report from credit bureau and analyze reasons for bad credit report.

4. It is good idea to request someone who has a good credit history and credit report to co-sign for a loan. Start making payments on time. Bear in mind, any default is going to affect adversely, the co-signer's credit rating.

5. Once the loan is completed, one may repeat the cycle, without making a default payment.

6. Another way to establish credit history is to get a secured credit card - use the loan availed with a co-signer to open a savings account and use this money as a security to get a secured credit card.

7. Use the secured credit card to buy things and make prompt monthly payments to the credit card company.

8. Get retail credit cards - like gasoline, departmental store etc., and start using them. Make prompt monthly payments. This also helps to build credit history.

9. Continue this credit history building process until unsecured credit is obtained.

10. Once credit history is established and credit scores restored, do not maintain credit balance of more than 30% of the credit limit.

With the above steps, one can easily rebuild credit history and restore original credit rating and credit scores.

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