Why We Need Credit: Credit is part of life today whether you have good, bad, or no credit and it will impact your financial life. Our finances have a huge influence on everything. Without credit the ability to build wealth will be limited. For example, credit is needed to buy a home which can be a great asset. The net worth of a homeowner is greater than that of a renter and owning a home is crucial for being able to build wealth.

Having credit gives us the ability to buy things and not having good credit can make it difficult to get certain types of insurance and even limit job opportunities. Many employers pull a credit report before hiring. When young, this is normally not a problem but if you are in your thirties it may appear suspicious to have poor credit.



What Is A Good Credit Score: A credit score is important and it determines the ability to get credit with good terms. Fair Isaac, reports that the average score in the United States is around 723  and scores of 700 or over is good. A score of 700 and above could get someone approved for most loans. When scores are above 760 they could be considered exceptional. Scores about 650 to 700 can be viewed as fair by some lenders who would approve you for a loan. You should look for ways to improve fair credit scores and scores below 620. In March of 2009 the FHA required a minimum score of 620 and anything below 620 will seriously limit your options with some lenders. A score of 620 or under can be considered a poor credit score and applicants may be considered as risky.

Ways to Improve Credit Approval:

* Have at least four different accounts and a mixture of the type of accounts like installment loans and revolving accounts.

* A bank or a credit union can be a good place to start by getting a bank account and creating good history.

* Avoid writing bad checks in case you apply for a loan with the bank in the future.

* Establish a relationship with a bank manager or other lender, if accounts have good history it could help get you a loan later in life.

* If bad credit or bankruptcy history is on credit reports, ask lenders what it takes to get approved for a loan.

* If you have bad check writing history, consider getting an account at a different bank to build good history.

* Try getting approved for small, no collateral loans at a bank, and pay on time.

* Join a Credit Union, they may work with you.

* Open a CD at a bank, they may issue a loan in the same amount.

* Get the Landlord to report good payment habits to the Credit Bureau, it will cost but building credit is worth it.

* Get your parents or a spouse who has a positive history to add you as an authorized user on their credit card. 

* Apply for Store Cards and Gas Cards, these lenders want you to purchase their goods.

* Get a parent or friend to Co-Sign for a loan.

Getting good credit is the goal for establishing credit. Be sure to review any terms and conditions and make sure you understand them. Review the dates the payment is due to avoid any late fees and to avoid late payments being reported on your credit report. Keep your balances under 30% of your credit limit. Monitor your credit reports from all three credit bureaus by ordering one free report from each of the three credit bureaus during the year.



It is important to know all information about your credit and whether it is good or bad. Credit must be monitored for incorrect information that can contribute to having bad credit. For example, if there is documentation about bankruptcy or constant late payments, make sure it is your information and does not belong to a stranger. It is not uncommon to have a stranger's information on a credit report.

Anytime your credit reflects late payments, set a goal to never be late with any payments. Try paying them in advance to prevent late payments. Consider setting up automatic payments from a checking account but make sure to have the money in the account avoid overdraft fees too. Overdraft fees do not look good to a loan officer at a bank if you ever ask them for a loan. 

Learn about how credit scores are determined and get some facts on all the ways scores are affected. Knowing that late payments, bankruptcy, debt collections, and other things greatly lower scores can help when setting a goal to rebuild bad credit. Find out how much you are in debt. The amount you owe should be less than your total available credit. 

Applying for too much credit often can have a negative effect on credit. The types of loans are important, for example, if you have too many credit cards with over the limit balances or too many loans from finance companies, it can lower credit scores. It is not impossible to rebuild bad credit using a credit professional or by doing-it-yourself. The first step to rebuild bad credit is to start paying down debts and always pay bills on time.



Establish or Rebuild Credit:

It can be frustrating trying to find a way to get credit when you don’t have credit and it seems the process is an endless circle. You can’t get credit because you don’t have credit and you don’t have any credit because you can’t get any credit.

College students may have a better chance to establish credit now because of their future earning power. Credit card companies may be more than willing to approve a student's credit card application. A student must make sure they are ready to establish and handle credit without maxing out credit cards only to end up owing thousands of dollars in credit card debt. The new laws for 2010 will have an effect on companies who target people under twenty-one, so now is the best time for a college student to apply.