Financial First Steps: How to Establish Credit
In today’s world, nearly everyone is going to need access to credit at one point or another. This is because a lot of things, such as new cars and homes, cost much more money than most people could reasonably pay up front.
If you are a student, credit card companies target you due to the belief that you have the potential to be a high earner and a long-term customer, and that your parents will help pay if you fall behind on your balance.
For those who aren’t students and are attempting to build credit, however, there is a hurdle to overcome, because lenders abide by the unwritten law, “you must have credit to get credit.” Fortunately, there are a number of ways to overcome this hurdle:
- Open a checking and savings account
- Find a cosigner, such as a parent, other relative, or friend
- Apply for a secured credit card (a credit card where you make a security deposit, and credit line is percentage of deposit)
- Apply for a retail credit card, but make sure the retailer will report your payment history to the three major credit bureaus: Experian, Equifax, and Transunion. These bureaus collect and record credit information so that your credit score can be determined.
- Check with your employer about getting a reference for a loan
- Check with your local credit union: They may have a program that helps members secure credit
Once you build your credit, the types and amount of credit you can receive will increase, and at better rates (as long as you stay on top of your payments and maintain good credit standing!).
For more information on building credit and choosing credit cards, as well as a variety of other topics, check out AIER’s How to Use Credit Wisely Digest. Dedicated to helping people understand credit, the How to Use Credit Wisely digest is a great resource for anyone interested in getting their financial lives on track. Best of all, it’s free!
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