The key to building your credit history and getting it as high as possible is very simple: act responsibly with credit.

Sounds simple enough right? The problem is that the system is a bit of a catch-22. Companies won’t issue you credit if you don’t have a credit history. You can’t develop a credit history unless you start getting credit. Sometimes you can get around this if your income is high enough and the credit card limit they offer you is safely low enough. If you don’t fall in that category, how do you start building your credit history?

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With us firmly entrenched in a recession, the topic of loaning money to family and friends has really come to the forefront. With the holidays coming up, higher heating bills, and the potential of a layoffs (if they haven’t occurred already), turning to family and friends may be the last resort. If you can’t, or don’t want to, get a loan from a bank or through a peer to peer lending service like LendingClub, family and friends may be the only option for some.

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How many of you have heard of a horror story where a friend lent another friend or family member a significant sum of money (we’re not talking lunch money) with verbal payment agreements (or even written, it hardly matters 99% of the time) that turned sour? It’s those people you see on People’s Court or Judge Judy where a happy agreement made on a bright sunny day turned into a miserable treaty signed under gunpoint. As the lender, you feel guilty trying to collect but the money is rightfully yours. The borrower may have hit a rough patch in his or her life and needs a little extra time. The borrower may truly be a deadbeat, who simply looks like they’ve hit a rough patch, and wants more time. Whatever the case… it’s a bad situation.

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