From bartering in ancient times to metal coins to paper money, credit and credit ratings are the next step in the evolution of money. With the Internet and e-commerce becoming easier to use and more popular, electronic transfers and so-called "plastic currency" are quickly taking the place of cash.
The way credit works is that it keeps a record of how you spend and borrow money. This record is used to figure out how reliable you are in a particular transaction, such as whether or not you are likely to make payments on time or at all. Even though this is a simple way for stores to protect themselves from debt and bad creditors, it can be too harsh and catch people unjustly, making it so they can't buy things or can't buy them at such a good price. So, it's important to keep your credit rating clean and on the up and up. As a side note, having no reputation is just as bad as having a bad one. If you don't have a history of credit transactions, how will lenders know you are worth the risk and effort?
Even though it might seem strange, you have to buy credit to take the first (very important) step up the credit rating ladder. Think of it like the feedback system on eBay. Once you've proven yourself with small, unimportant transactions, it will be much easier to buy bigger things. Opening a savings account is a great place to start. This is a big plus for lenders, and the bank may even give you a credit card. If you do get a credit card, make sure to pay off all debts and charges as soon as possible. This will keep you from having to pay late fees and will show "that you are a prompt customer," which will help your credit score.
Use retailer programmes that let you pay for big purchases in fixed amounts each month over a set period of time. This is a great way to build up your credit. Just make sure that the store will give you credit for your hard work by telling the major credit bureaus about your loan or payments.
Get a co-signer for any loans you want to take out. This will let you use their credit score and give the lender an extra guarantee that they can get their money back from the co-signer if you can't pay back the loan. This is a double-edged sword, so keep in mind that while you get the benefit of the co-good signer's reputation, they will get the worst of your bad reputation if you don't pay on time or just default. If you're going to be a co-signer for someone, you should be very careful and have a clear plan so you don't end up with a bad deal.
Remember that you have the right to see your credit report at any time. This can help you figure out what you need to do to improve your credit score, which is going down.
