Is There A Right Way To Establish Credit?

In the world of finances finding the right information about credit can be overwhelming. Everyday there is a new offer about the perfect credit card or loan and you may be wondering if while you trying to establish your credit if there is a right way to go about it. While there may not be one exactly right way to establish credit it is important to know the basics of credit and how to go about establishing it. Then once you have the knowledge you need to make an informed decision you will be able to decide what is the right way for you to establish your credit.

When looking to establish your credit evaluate each offer under the following criterion-

• Look for hidden costs in the credit card offer. When you are applying for any credit card be sure that you look beyond the “No Annual Fee” for any hidden costs. There are other fees that can cost you more in the long run if you are not careful. Some of these can be-Late fees for late payments. Most cards will charge fees when payments arrive late but while some creditors have a set fee, others will charge a percentage of the minimum due. If you have to pay late fees just twice in a year it could cost more than paying an annual fee. So make it a priority to ensure that your payment arrives on time. Another hidden fee to look out for is the Over-Credit-Limit fee. If you charge more than your credit limit, many creditors have a set fee while others charge a percentage (such as 5%) of the amount that you are over your limit. There is another fee to consider that is known as the Lost Card Replacement Fee. Some creditors will charge cardholders whose cards have been lost or stolen more than once or twice. These fees are usually $5-10 dollars.
• Build good credit. If you are looking for a right way to establish credit this must be a priority. By building good credit you must always pay your bills on time. Keep the balances low on revolving credit or credit cards. Pay off your debt instead of moving it around. Do not close your unused credit or store cards as a short-term strategy to raise your credit score. And most of all do not open lines of credit that you do not need.
• Know your credit rights. It is important that while you are establishing your credit that you understand that you have the right to get a free copy of your credit report once every 12 months from each of the nationwide consumer credit reporting agencies. There are many different sites online that can explain to you what information your credit report has and the best way to go about getting one. In addition it is important that you understand that if you are 18 years old or older you cannot be denied a card based on your age, racial background, gender, marital status, religion, national origin, or participation in a public assistance program. Your credit history and other personal information should be the sole basis for a financial institution to make the decision as to whether or not to extend credit to you. You also have the right to protection against unauthorized purchases. Most major credit cards will not hold you liable for unauthorized purchases as long as you abide by their reporting processes. This coverage extends to purchases made in a store, over the telephone, or online.
In conclusion by knowing about credit, how to use and manage it you will be able to make the best determination on how to establish your credit the right way and most importantly determine what works best for you and your financial future.