Personal finance Q&A: Good credit

Associated Press

Question: I am a recent college graduate and have no credit history. How do I build good credit?

Answer: Having no credit history at all can be just as bad as having bad credit. The good news is that at least you're not thousands of dollars in debt. Still, your creditworthiness influences a lot of decisions.

"There are so many decisions based on your standing" beyond lending, said Lucy Duni, director of consumer education for TransUnion's TrueCredit.com, a credit monitoring service.

The first step recent college graduates should take is to get a full picture of their credit history. Contact the three nationwide credit reporting agencies - Equifax Inc., Experian Information Solutions Inc. and TransUnion LLC - just to see if anything has been reported. For a good credit standing, you should have a FICO score of 680 or higher, according to Duni. Young graduates might be surprised that they may have some credit standing because of a utility bill in their names, Duni said.

Once you confirm what's on your credit report, here are some steps to build creditworthiness:

Open a bank account, but don't overdraw your account. Bank accounts don't appear on credit reports, but how you manage your savings or checking accounts gives you more credibility to lenders. Apply for department store or gas credit cards. These credit lines are easier to qualify for than a major credit card, said Susan Keating, president and CEO of the National Foundation for Credit Counseling, a nonprofit credit counseling organization. But make sure they report to a national credit bureau. At the same time, experts also warn not to apply to too many cards all at once. Duni estimated that every inquiry drops your credit score by about 5 points, as lenders think you're desperately seeking financing. And stay away from any cards with exorbitant fees or interest rates. Once you have the credit cards, make sure you use them responsibly. Keating encourages recent graduates to stay within 30 percent of a credit card limit. And pay on time. If you get turned down for a credit card, experts recommend applying for a secured credit card, which requires you to put down a deposit, usually between $200 and $250 with your application, according to Bankrate.com, an online publisher of bank and credit card information. The big disadvantage is that many of these secured cards have high interest rates and annual fees, according to Bankrate.com. http://www.heraldnet.com/article/20070729/BIZ/707290336/1005