Four smart tips to establish credit and a good credit rating Credit scores are an inevitable fact of life. Although I disagree with the way the government chose to handle the bank’s ‘toxic assets’ with a big juicy rescue plan, that’s now water under the bridge. It doesn’t seem that consumers have benefited much. In fact, getting credit seems to be more difficult than ever before and keeping your credit rating in good shape is certainly a necessity. Here we’ve got some pointers on how to establish credit, maintain a good credit score and how to avoid some of the pitfalls of the credit world. 1.Before you seek to establish credit, get your budget ship-shape! Establish a realistic household budget which is in line with your income and debts. This is an important step, when you consider that food, clothing and shelter alone takes a big bite out of your total income. Add on transportation and gas and there may not be a lot left. What’s left ?and not spoken for ?is called disposable income. Disposable income is what you can spend on extras. 2.Determine what percentage of your disposable income should be deposited into a savings account each payday. Everyone should have a savings account to, at the least, deal with emergencies. At best, your savings account should not be touched. Just let it grow. (Reduce your disposable income by this amount.) 3.Now, whatever you’ve got left after meeting these necessities is the amount you can afford to pay each month, once you establish credit. Let’s say you’d like to have the convenience of a department store card. If you need some clothing items, you can get what you need and pay over time, rather than having to pay $200 on the spot for a winter coat, suit or whatever. Department store cards are fairly easy to get and can be a good way to establish credit. The trick to this? Don’t get in over your head! Know how much the payment will be before you buy and make sure you can pay it each month. Understand the effects of the interest rate and making only a minimum payment. Paying the card off as quickly as possible ensures a better credit rating and saves you money. 4.When your goal is to establish credit, remember that you’re creating your financial reputation with creditors. If you live up to your end of the bargain, make payments in a timely manner and avoid late fees, you’ll establish credit you can build on in the future. If you begin with just two modest credit accounts, say, a department store card and a gas card, within 6 months, your credit should be good enough to take on a bigger ticket item, such as that big flat screen TV you’ve had your eye on. You can see that it’s fairly easy to establish credit. The hard part is not going overboard. If you bite off more than you can chew, your credit rating can go down rapidly and then you’ll be digging out of a hole. Each time you choose to establish more credit, examine that budget before you put in an application. Moderation in all things!