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Building Credit

You might be thinking, “I have years before I need to think about credit cards and paying back loans!”

But think again. If you want to buy a car, chances are you’ll need a loan. And it won’t be too long until credit card offers will come your way, and some of them will probably sound tempting. Besides, the best time to learn about something is before you need the information.

How do you get credit when you have no credit history?
Here are a few suggestions from the Federal Trade Commission (FTC) and the Federal Reserve Bank of San Francisco.

Open individual savings & checking accounts. (A credit union is a good place to do that!) Over time your transactions (for example, deposits) will show that you can handle money responsibly.

Apply for a credit card issued by a local store. Ask if they report to a credit bureau. If they do—and if you pay your bills on time—you’ll establish a good credit history. Use the card responsibly. Don’t buy things you don’t need; remember, you still have to pay for them.

Apply for a secured credit card. For this, you will have to open and maintain an account at a credit union (or another financial institution). Your account will be considered your security for your line of credit.

Ask someone with an established credit history (such as one of your parents) to co-sign the account if you don’t qualify for credit on your own. The co-signer promises to pay your debts if you don’t. Don’t take advantage of the person who co-signs your account! After all, you’ll want to repay any of your debts promptly so you can build a credit history and apply for credit in the future on your own.

You could apply for a loan. Be aware, though, that you must pay interest on the loan.

A Little Advice
Be patient. It takes time to establish credit. You must build a record of your ability to pay your bills on time and consistently.

Once you have credit, you must protect it. This means that you should be careful with your account information…along with any credit, debit, or ATM cards you might have.

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