While credit may not increase your income, it does allow you greater control of it. Good credit is a necessity to successfully apply for a loan to buy big-ticket items, such as a house or car. Establishing a solid credit rating proves to potential investors or lenders that you have a history of paying back loans on time and this means they will be more likely to loan money in the future.
Although cash is a great way to pay for certain things, it won’t help to establish a reliable credit rating. A solution to this dilemma is to use a Reach card. The card functions like a credit card, but with one major difference; instead of borrowing money the card allows you to make purchases from your own savings or chequing accounts, but will still contribute to your credit rating.
To build a positive credit history:
- Create a chequing or savings account at a bank and be careful not to go over your balance. Managing your accounts properly proves your reliability to potential lenders. A positive credit history, or rating, is very appealing to banks and investors and will hold you in good stead for future loans.
- Put utility bills, such as electricity, water, telephone and gas in your name and always pay on time. This establishes your ability to budget money well and pay your debts. Lenders assume if a person is able to do this, they will be able to do the same when loaned money.
- Apply for a bank credit card and a bank loan. The set credit limit or annual percentage rate is irrelevant. What does matter is that you put some charges on the card and pay them off in a timely manner. In this way you will build a positive credit rating for yourself.