One of the most important factors that affect your credit score is your credit history. It may take you many years to establish a credit history and although both of them overlap, without a credit history, a credit score means very little.

It’s difficult to get any credit without a credit history

The weird thing about getting credit is that it’s tough to get any if you don’t have it to begin with. Thus, any use of credit cards, student loans, auto leases, and mortgages will eventually play a vital role in determining whether you’re able to obtain financing in the future, and at what terms. So, it’s extremely important to make the right decisions early on to ensure you’re able to get credit in the first place.

Start with a checking or savings account

The best way to start off your credit history is by opening a checking and/or savings account. Once you have an account, you will be able to get the extended credit offers as well by the issuing bank, such as a credit card to go behind your existing account. This is a simple way to start building your credit history, and should open the door for more offers.

Most creditors require a solid credit history to extend any mortgage

In case your overall credit history is not good, it might become difficult for you to secure a large line of credit. For example, if you’re looking for a new home, banks will not extend a mortgage unless you’ve got years of solid, documented credit history.

Actually, at least three credit trade lines, each having a two-year history, are required by most of the mortgage lenders. Thus its really important to establish your credit history early on so you can avail the options in the future.

Start with a bank or store credit card and move slowly towards a mortgage

It is best to start off slowly and slowly build your credit history so that you become eligible for the big loans. Start with a bank issued credit card or through a store credit card or gas card, slowly proceeding towards auto lease, and finally a mortgage.

With time, you will be able to prove your trustworthiness to the creditors

With the passage of time, if you make payments on time, you will be able to prove yourself to the creditors that you’re able to carry large amounts of debt. Once you gain their trust, you will be able to avail many more offers.

Make sure you report the accounts to the credit bureaus

There are many accounts that aren’t often included in credit reports, such as common utility bills. If the credit bureaus are unaware of these accounts, you won’t receive any benefit credit-wise. Therefore, you should add these accounts manually by contacting the credit bureaus and providing the accompanying paperwork to prove your timeliness.

Review your credit report carefully from time to time

It’s important to carefully review your credit report from time to time to ensure things are being reported accurately. You can do this by ordering a free credit report from the credit bureaus, once a year, which will display all of your information except for the credit score itself. If you find any misinformation, quickly report it to the bureaus.

A long credit history will have less impact of a bad mark

Also, remember that the longer and deeper your credit history, the less impact a bad mark will have on your overall score. For example, if you’ve got limited credit history, one 30-day late payment could sink your credit score 50 points. Conversely, if you’ve got years of solid credit, one late payment will have considerably less impact.

Credit history and credit score are two different things

Do keep in mind that although credit history and credit score may seem interconnected, they are two very different things. It is possible that someone with a 700 credit score may get denied credit while another consumer with a 660 credit score gets approved. Therefore it is important to work hard to maintain and protect your credit history to ensure you never get denied when you’re in need of new credit.

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