Establishing Credit may seem like a daunting task to a young person, but a good strategy can help take some of the sting out of the process.
Start by opening a checking and savings account in your name. This alone will not establish credit, but it will get you on the map and provide much needed credibility with financial and lending institutions. Keep records of your checking account balance, and don’t ever overdraw on your account. Bouncing a check will not help your credit in the least. That’s your good credit.
With a limited credit history you probably won’t qualify for a major credit card yet. So you might want to consider opening a charge account with a local department store or a large oil company. Usually, oil companies and department stores do not set such rigid standards as major credit card companies. So obtaining one of these cards will be much easier in the beginning.
Another thing you could do is to put one or more of the household utilities under your name, and make sure to pay those bills on time. Your good payment history will be collected by the 3 major credit reporting agencies (Equifax, Experian, and TransUnion), which will then help you get a good credit rating.
What To Remember When It Comes To Credit Card Application And Use Credit cards are not a source of free money – misuse can damage your credit. You have to understand the terms and conditions, the due dates, interest rates, fees, and grace periods before you apply for one. Keep monthly charges manageable – don’t go overboard on your spending Refrain from getting too many credit cards. Pay the full amount every month. Never be late in paying your bills.
These simple guidelines will help you prove your credibility over time. And in doing so, will qualify you for an extended line of credit.
All in all, establishing credit involves having to prove to creditors that you are responsible enough to have your financial affairs in order and be able to pay bills on time.
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