In our last finance article, we answered the question, “What is credit?” However, many young people have a hard time when they first leave home, because they don’t have credit. Credit issues don’t just affect young people. Those who have suffered through a divorce, physical illness, or job less can also be struck with credit problems.
How Do You Get Credit
Each time you take something out on credit, whether it is a credit card, loan, or mortgage, your payments are tracked and reported by your lending agency. For example, you take out a mortgage through your local bank. Each time you make your payment on time, this is reported to the credit reporting agencies mentioned above. These regular, on-time payments are what help to build your credit. However, if you fail to make payments on time, this is also noted on your credit, and it causes your credit score number to drop.
When my sister decided to get her first apartment, the landlord wanted her to provide her credit rating, of which she didn’t have much, because she was young. This is also why many eighteen-year-olds have difficulty getting a credit card, because they have no credit established. I have also helped family members apply for secured credit cards, where you pay money up front to use on the card (just like a pre-paid), only your deposit is kept in case you fail to make payments. The upside is that if you do make your payments each month on time, the secured credit card company reports this as a positive on your credit score!
The first way to get credit established is to take out a loan or get a credit card where you make regular payments on time. If you choose to get a credit card, make sure to only charge small amounts (like $20-$40) and pay them off in the month that they come due. If you’re not able to get a credit card on your own, it helps to have your parent or another adult to co-sign a credit card or loan with you, and then make regular payments on TIME!! The quickest way to build credit is to make payments ON TIME!!!! Do I need to say it again? You need to make payments on TIME! Ok, I think I’ve made my point. You can also take out the pre-paid style secured credit card we mentioned previously!
Make sure to read our other Personal Finance articles so you can stick to your budget!
10 Tips for Building An Emergency Fund
How Couponing Saves Me $7,000 Per Year
Create A Gift Closet & Save Money
Starting a Stockpile Can Save You Money
Three Tips to Rebuilding Your Credit
How to Have the Best Yard Sale Ever
Keeping a Price Book Can Save You Money
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