Do Business Well

Your credit record is your financial reputation. If you want to rent an apartment, buy a house, get a phone hooked up, get a credit card, take out a loan, buy a blimp, or start a business, you need a good record.

A company that wants to check your credit can call other companies that have done money deals with you in the past, or they can get a report from a credit reporting bureau. But if you’ve never been granted credit in the past, you don’t have a credit record. Where do you start?

Fortunately, you don’t always need a credit record. Some credit grantors realize that no record is better than a bad one. If you don’t have one, they’ll look more carefully at other information on your credit application:

• Income. The longer you’ve held a job, the better you’ll look. Don’t lie about your salary or how long you’ve worked there; they may call your boss to verify the numbers. If you have other sources of income—side jobs, allowance, whatever—be sure to list these too. Every little bit helps. Save your check stubs. If someone pays you in cash, make out a bill, mark it “paid,” and have her sign it. Make sure that the money you earn can be used to prove your ability to earn more of it.

• Expenses. You may be asked to list some of your regular expenses such as rent and car insurance. If they don’t ask, don’t volunteer it; and if they do, list only what is asked for.

• Assets. List the amount of money you have in savings and checking accounts (they’ll call to verify these, too, so shoot straight). If you have money invested in mutual funds, CDs, stocks, bonds, gold, or pork belly futures, write it down. Be ready to provide the name of the firm that handles these investments for you. These things suggest that you know how to handle your money. You may wish to mention any toys or vehicles you own that are worth several hundred dollars or more: an expensive camera, motorcycle, car, or Bell Jet Ranger helicopter.

• Liabilities. If you have any debts—auto or personal loans, charge cards—you’ll be asked to list your monthly payment and the outstanding balance.

If your monthly expenses all but wipe out your income, they’ll figure you don’t have enough cushion to make monthly payments on a loan or credit card debt. If your liabilities (what you owe) greatly exceed your assets (what you own), they don’t want to help you dig your grave deeper. (Actually they know that once you’re in the grave, you won’t leave enough behind to pay off the debt.)

But if you have a healthy cash flow, low or no debt, and evidence of good money management habits, you’re their kind of customer.

Steps to Build Credit Record

1. If you’re 18 or older, apply for a credit card from Sears, Montgomery Ward, or another large department store. These are typically the easiest to qualify for.
2. When you get the card, use it to make one small purchase each month for six months. Make sure it’s something you would have bought that month anyway, or charge something your parents need and have them reimburse you for it.
3. Pay your balance in full the moment you get the bill! If you bounce a check or make a late payment, you’ll defeat your purpose. By paying the balance in full you avoid paying interest on the “loan,” which would waste your money.
4. Each month your payment record is sent to the credit bureau. They will begin a credit record on you, which will be spotless due to your outstanding payment habits.
5. Apply for your next charge card. If your application is accepted, you may wish to close your first card’s account by cutting the card in half.

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