Alternative Credit

Using and obtaining credit is a necessary evil in today’s marketplace. If you normally pay cash for most things, and do not use credit cards, then your credit history is probably quite limited. Not using credit might seem like a good thing, as it limits your risk of falling into debt. However, it can become problematic when you apply for a loan or other type of credit to purchase a big-ticket item such as a house or vehicle, or even try to rent a car (most rental companies require borrowers to make reservations using a credit card).

If your credit history is limited, you can start building a record by creating your own alternative credit history. Items to include:

• Statements from utility bills. These show how long you have had accounts, and how you have handled paying your bills. You can also ask your utility providers to write recommendation letters for you.

• A recommendation letter from your landlord. If you have been a good tenant, and have paid rent on time, this will indicate that you will also pay your new landlord or mortgage on time.

• Bank statements. Monthly checking and saving statements reveal how you handle your money. Bounced checks indicate cash flow problems, while bills paid on time show sound debt management.

• Copies of cancelled checks or money orders. These show how you have handled paying your bills.

Some lenders and creditors will also provide you with a list of additional information they are willing to accept in lieu of a traditional credit report. You might also want to consider opening a credit card account to begin establishing a credit history.

If you choose to open a credit card, do some research to find one that best fits your needs, and maintain a low balance. Using a credit card wisely will help put you on the credit map with creditors. Consumer information websites such as e-wizdom.com can provide information and interest rate comparisons on credit cards.