In this modern age, it is nearly impossible to function without obtaining a good credit history. I discovered that fact in a rather rude awakening after I finally got around to checking my credit report a few years ago.

Better Interest Rates

Since I was working at a financial institution, I was aware that people who had an excellent credit rating got the best interest rates for their loans, and filling out loan applications for them was just a formality to satisfy the auditors.

I knew that people with poor credit ratings were less likely to obtain loans, and if they did get an approval for a loan, their interest rate was higher than that of the more fortunate people with good credit.

When I wanted to obtain home insurance for my house, I learned that I could get lower insurance premiums if I had an excellent credit rating. I also learned that the agent could check my credit report in just a matter of several minutes as we talked on the phone.

It’s Not Fair

I was disturbed by the fact that the people who could afford to pay the higher rates got the lower rates, and the people who struggled to make ends meet were forced to pay higher rates that they could not afford.

It was not fair, but that’s how it works in the real world. I found that if I wanted to play the game, I had to play by their rules even if they weren’t fair.

No Credit is Nearly as Bad as Poor Credit

I was married for more than 20 years, and even though I paid all the bills, our credit was all in my ex-spouse’s name. I never realized that it would become a problem for me if I did not establish a credit history for myself.

Even though I was in my 40′s, I had to start from scratch to build a good credit history. I began by inquiring about what was on my credit report and found that there was nothing on it. However, that is better than having unpaid loans and collection activities or bankruptcies as is common for many people after a divorce.

If I had found any errors on my credit report, I would have contacted the companies involved to get the report corrected.

If I had become aware of an unpaid debt causing a bad credit report, I would have paid it off even if I had to pay a little each week. Making even small payments would have made my report look better if I was making them regularly.

I learned that it was important for me to establish credit for myself if I wanted to function in the modern financial world. In this age of electronic communication, people with whom we do business rarely have the opportunity to speak to us face to face and look us in the eye. They simply rely on data obtained from disinterested third parties.

There are many occasions for which solid credit histories are helpful:

• Job applications
• Loan applications
• Insurance applications
• Renting a house or apartment
• Opening a checking account

Credit Cards

Applying for a credit card was the first thing that I did for my financial situation after my divorce. When the bank ran my credit report, I discovered that I had no credit. Even though I always paid our bills on time and would have had nothing negative on a credit history, if those facts were not recorded at the credit bureau, they were of no advantage to me.

Since I worked at a bank, getting the card was not a problem for me. If I fail to pay my debt, my employer will just fail to pay me.

If I had not been able to get a regular credit card, I would have applied for a secured credit card. I would have deposited $500 in a bank savings account and used that account as security for a credit card.

I can also apply for a credit card offered by a department store or a gas company since it is usually easier to get approval for those.

I use the card and pay it off in full every month, and never charge anything unless I am certain that I can pay for it when I get the bill.

Employment

I was involved with the process of hiring new employees and knew that the application for employment included an authorization allowing us to run a credit report on the applicant. When the field of applicants was narrowed to 5 or 6, we always checked their credit, and if the report was not good, we usually could not consider them for the job.

Loans

I can get a loan using the same principle as for a secured credit card. I can borrow $500 and put it in a savings account. My money in the savings account will accrue interest, and that interest will compound and make my investment grow. Every time I make a payment on a simple interest loan, the balance will decrease, and since I will pay interest only on the unpaid balance, the interest will be lower each month.

When a bank or credit union is holding my money as security, they do not have a problem giving me a credit card or loan, and if I am careful to always make regular payments before they are due, I can begin establishing my own credit.

If I cannot get a regular loan, I can ask a friend or relative with good credit to co-sign for me. Since I will be making the payments, I can develop a good credit history to help establish a solid credit report.

Credit Bureau

In time, the credit bureau receives reports on my credit card and loan activity, and I eventually build up a solid credit history. However, it takes time to prove that I am responsible and a good credit risk, so I must be patient.

Some of the Necessary Ingredients for Building Credit

• Patience
• Persistence
• Responsibility
• Punctuality
• Assurance that my credit report is accurate

Helpful Hints for Establishing Good Credit

• Keep the same job
• Do not move often
• Do not apply for loans frequently
• Pay all bills before they are due

Advantages of Good Credit

• Better rates for loans and insurance
• Easier to get approval for loans
• Easier to get a job
• Easier to rent a house or apartment

Since it may take a year or more to establish a solid credit history, I must be diligent to keep it good. If I have a legitimate reason for not making at least the minimum payment on a bill at some time, I will call or write the company to explain the situation and let them know when I will get the bill caught up.