Establishing credit should be one of the first steps as young people enter the world of work.
Good credit will enable them to get better jobs, rent a home, buy insurance, sign up for cable TV, and of course – purchase a car and a house when the time is right.
There’s no way to hurry the process, so getting started right away is important.
The first step is to order a copy of your free online credit report to see where you stand. One young man was shocked last year when he learned he had bad credit – for a credit card that someone had taken out under his Social Security number when he was only about 9 years old.
So get your free report, with scores, and read it carefully. If you find errors, or signs of identity theft, now is the time to deal with them.
Next, you need to establish different kinds of credit – one at a time. Choose one, apply, and get established before making the next application.
A retail store or gas credit card is easier to get than a major credit card, so is a good starting point. So is a secured credit card. If necessary, get a family member with established credit to co-sign for this first card.
Then, use it carefully. Keep a balance of no more than 30% of your credit limit and always pay on time.
Once you’ve established yourself with a credit card, take out a small installment loan with a local bank or credit union. This can be as small as $500. The important thing is that you make the payments on time every month.
Creditors want to see that you can manage money – so don’t take out the loan one month and pay it in full the next. Those regular payments build your credit scores.
Purchasing from a retail store on credit is another way to establish yourself, but first check to see that the store you choose does report to the credit bureaus.
Once you’ve established these lines of credit, consider buying a good used car on credit. The interest rate will be slightly higher than that for a new car, but the payments will be considerably less, and the last thing you want to do starting out is stretch your budget to its limits.
Whatever your new wages or salary, strive to put 10% away to invest for the future. You never know when opportunity will knock – and if you have the funds you’ll be able to answer.
Author: Mike Clover
CreditScoreQuick.com
