Establishing Credit

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I think it goes without saying that having good credit is very important. People work hard to develop a good credit score and work even harder to maintain a good score. As a credit counselor, I meet many individuals that have no credit at all and their most frequent question is: “How do I get credit?” With this in mind, I thought I would write about establishing a credit history.
I recommend that you all read our prior blogs from this month on learning what makes up your credit score as a starting point. It is important to know this before establishing credit. Remember, it only takes a couple of wrong decisions in the beginning (of establishing credit) to have a major impact on the remainder of your credit life.
Most adults have some sort of credit history, but for the younger generation, just starting out, obtaining credit may seem to be a mysterious process. We will talk about the small things people can do to develop a credit history:
Become an Authorized User:
If you have parents or a spouse with good credit history, it might be a good idea to become an authorized user on ONE of their credit cards. Being authorized will allow you to use the card and will start reporting on your credit history. However, by being a user of an account you are also subject to activity on that account.  If a payment is late, the card gets ‘maxed out’, or if the card gets closed, it can have a negative impact on your score. So, before you become a user, make sure that person you will be on the card with, has a good credit history.
Apply for a credit card:
You can apply for 2 basic types of cards: secured or unsecured. When applying for a secured card, you will have to put cash down as collateral, for the bank, in case of default. An unsecured card is the exact opposite, meaning there is no collateral tied to it. I recommend starting at your local bank or credit union (where you have a checking account) to start the application process. You already have a relationship with them and it can be easier to be approved. Once you have the card, just use it for a small monthly purchase and pay it off, in full, every month.
Getting a co-signer:
When you apply for a car loan or a personal loan, the creditor may approve you if you have a co-signer on the account. This means that the creditor is using someone else’s good credit history to approve you for the loan. You will be an owner on the account and, of course, the other person will be a co-owner. Remember if the other person makes the loan payments and they fail to make payments, it will have a negative impact on you, as well as, themselves.
Student Loans:
Student loans will show on your credit report. So, if you already have student loans, then that means you have already established some sort of a credit history. It’s always good to remember that you do not need to take out the full loan amount that is offered to you each semester. You should only take what you need. By practicing this method, you will save yourself thousands of dollars when you are done with school.
Of course, there are several different types and forms of credit available for you to access. If you find yourself applying for credit and are not exactly sure what you are applying for, WALK AWAY!!! Do not let a lender force you into doing something you are not comfortable with. There are non-profit credit counseling agencies that can help educate you on the rules of credit and help develop a game plan for you to establish credit. Apprisen is one of those agencies. For more information, please visit our website at or contact us by phone at 800-355-2227.

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