You begin to establish credit the day you get your first credit card, apply for a student loan, or sign a contractual cell phone plan. How you handle the credit afforded to you has a direct impact on the products and rates offered to you for years to come.

What is a credit rating?
Your credit rating is a measure of responsibility. It demonstrates to banks and other lending institutions that you’re consistently able to pay your minimum balance on time. Your credit score represents a track record, and where you’re at now.

The strength of your credit history is what determines if you qualify a credit card, a loan, or a mortgage, and can affect the interest rate you’re offered. If your credit rating is low, you will be deemed high risk, and the interest rate will be much higher, if you’re even offered credit.

How do I establish credit?
For new or young borrowers, this can be challenging, if you don’t have any credit history.

Some lenders will allow someone with an established credit history, such as a parent or guardian, to co-sign a credit application with you. Though remember, this means that both parties are responsible for timely repayment. If your mother co-signs your credit card application, and you fail to pay, this will negatively impact both credit scores.

Most credit cards are unsecured, meaning you haven’t put down a deposit or secured it against property. However, if you don’t have any credit history, you can look into getting a secure another option is to apply for a secured credit card, where you have collateral backing up the line of credit. Often this is a deposit, which will be returned to you when you cancel the card. Some secured cards carry higher interest rates and have fees associated with them.

What affects your credit rating?
Consistently paying down credit on time, at least the minimum balance or more, builds or maintains your credit rating. Each late, missed, or incomplete payment negatively affects your score. Regularly miss or make late or incomplete payments, and this could negatively affect your credit score for years.

Your credit score is also based on the length of time you’ve maintained a credit account with a lender, and how long that account has been in good standing.

Credit reports only track funds that you’ve borrowed. They don’t include information about whether you pay your bills or rent on time.

How do I maintain good credit?
Always pay your minimum monthly balance on time. Better still, pay more than your minimum balance, and pay it early, as it can take a few days for transactions to clear.

Each time you apply for credit, it shows up on your credit history. Requesting too much credit in a short period of time can lower your score.

Request a credit history from Equifax or TransUnion annually, and review the report. If you find incorrect information, contact Equifax or TransUnion immediately so they can begin the dispute resolution process.