A couple of Credit Misconceptions
When you want to start building credit, do not simply get the first card which you find. This article will explain what can count and what doesn't count for building your credit. There are many different factors which go into credit but establishing credit takes certain factors.
The first misconception regarding credit is that utility bills will help you build a good credit score. Utility bills do not go on your credit report. These bills can help when you are looking to obtain a mortgage. If you have little credit but can show a stable payment history, you are able to obtain a mortgage. Your utility bills as well as rent payments can be used to show proof of the stable payment history. Activities such as these can help in building good financial habits for college students if they have to learn to pay the bills on time and have money budgeted for them every month. What counts towards your credit are any credit accounts such as student loans, car loans, and credit cards.
The second credit misconception is that no credit is better than bad credit. This is not normally the case. Bad credit does signify that you have a payment history. This is not the case with any credit and creditors will shy away from this more than someone with no credit. If you have no credit whatsoever, you will almost likely not be able to get an apartment if you wanted without a co-signer. Bad credit can be corrected and some information can be gleaned about the person's financial history from this while the person with no credit has nothing with which a company extending credit can often work with.
The third misconception about credit is that you should help out friends with credit. To go back to the previous paragraph, let's look at the definition of a co-signer. If you do not have enough credit, you need a co-signer. A co-signer guarantees a loan or a credit card so if the person with no credit does not pay the bill, the company who extended the credit will go after the co-signer.
There are many stories which you can read online of people co-signing for friends in good faith only to have their own credit demolished. If you have good credit, you want to guard that carefully. Be sure to help friends who you know pay their bills on time because what they do will be a reflection on your credit. You do not want to have to rebuild your credit as a result of someone else's inactions or inabilities to pay his or her bills.
Hopefully this article on a couple of credit misconceptions has helped you realize what can count towards building your credit along with why you need to establish credit. You must guard your credit wisely and if a friend ever asks for help, understand why you should decide yes or no.
