When you apply for a loan, you are essentially trying to make lenders believe that you are a good risk. If your credit is flawed, or nonexistent, this can be very difficult. A recent MSN.com article discusses four easy steps you can take to build your credit – or repair it.

Make Friends with the Bank

If you haven’t already, go to a bank of your choice and open checking and savings accounts. Being part of the financial world indicates that you know something about managing your money. Lenders want to know that you have a checking account available to pay your bills and that you are exercising financial planning by putting something aside for the future in your savings account. If you are under 18, you cannot be legally held to a contract, but you can still work on establishing your credit. An adult, usually a parent or guardian, can open a joint account with you or add you to a credit card, which will get your name “out” in the credit world.

Order Your Credit Report
Most lenders base their decisions on credit reports, which are reports compiled by for-profit companies called credit bureaus and include information about you, such as your name, social security number and birth date, as well as any credit accounts associated with your name or loans you hold. They will also include your payment history (including late payments), balances you owe and account limits. Keep in mind that if you have had credit problems in the past, your credit report will list them. You can order your report for a fee from each of the three major bureaus, or you can order a “3 in 1” report from sources such as MSN Money.

Fix It
It is extremely important to be familiar with your credit report so you can correct any errors or omissions as soon as possible. Some reports may include incorrect or outdated information. You should be sure to read through each of your reports and note any negative information, such as liens, judgments against you, late payments or delinquencies. Any of this information should be dropped from your report after seven years. More serious issues, such as bankruptcies, will stay on your report for up to ten years. Once you have compiled a list of problems, you can ask the bureaus to investigate any errors.

Add Positives
Lenders will feel more comfortable approving you for a loan with more information on your credit report. First, make sure that your personal information – such as address, social security number and phone number – is listed correctly. Also, make sure all of your credit accounts are included on the reports, especially if you have kept up with the payments. If you wish to establish new credit, consider applying for more credit cards. Department store and gasoline cards are generally easier to get than major credit cards and may pose less of a temptation for big spending. You can also consider taking out a small personal loan from your bank or applying for a secured credit card, which is similar to a loan. Whatever you do, make sure that you spend wisely and do not add negatives to your report when you were aiming to add positives!

It is always a good idea to keep your credit score in mind once you have established yourself in the credit world. Never apply for too much credit; one or two bank credit cards should be manageable if you can pay off the balances each month. Also, always pay all of your bills on time, including utilities and credit card bills. Finally, do not max out your credit cards or even come close. A good rule is to avoid using more than 30 percent of the credit you have available to you; any more, and lenders may start to feel that you are not a good lending risk.

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