How do you get credit when you first start your adult life? It's a valid question, but tricky to answer.
I recently got this message from my granddaughter: "I've been trying to find ways to build my credit.
At this point in time, I have no credit whatsoever.
The problem I've found is that it seems you have to have credit in order to build credit.
Every way I've thought of, I am not accepted for it because I have no credit in the first place.
(I hope this makes sense.
It's very confusing to me.
) Anyway, I was just wondering if you had any advice or ideas on how I could build my credit.
If so, I would gladly appreciate any advice I could get.
" Building credit when you're young is potentially dangerous, and I understand that for a student in college (where my granddaughter is at the moment) having a good credit rating is valuable.
I took a few moments considering her predicament, and finally arrived at the following advice: As far as credit is concerned the first thing I recommend is be very, very careful with it.
One good idea is use it only when necessary, and pay the debt off as fast as you can.
Keep in mind that the lending institutions tend to give more credit to those in debt, and you don't want to go there.
At the same time they give better interest rates to people who pay their debt quickly.
Here's what I did to establish my credit when I started my adult life: I needed a car, but had no credit.
I borrowed $300 from a lending institution.
Because of that debt a bank loaned me the money to buy the car.
I used the $300 as part of my down payment on the car.
My advice to you is getting a credit card with a low limit to start.
Use it for a few minor purchases.
(Just be sure to pay the balance in full each month so you don't incur interest.
) After a few months your account history with that card company creates your beginning credit.
You should be able to get a student credit card through your bank.
I know you're working your way through school, but I don't know if you have a bank account yet.
If you don't, try to open a checking account, put your earnings there, and pay your expenses from that account.
That will help you get the credit card.
As soon as you have the chance begin placing money in a checking account, get rid of the credit card, and use a debit card on the checking account.
Debit cards are great.
No interest, and you use money you already have.
Everything you buy that way is cheap.
Keep this in mind: If you use a credit card to buy a pizza, and make only the minimum payments each month on the balance for that charge, the pizza ends up costing you over $100, and takes you 15-years to pay it off.
Our society requires that you own a credit standing.
(Just try buying an airplane ticket with cash, and see what hassles you suffer.
) Owning a good credit rating is valuable, but too many of us don't properly control our credit, and quickly find ourselves in trouble.
Before you make any purchases on credit think long on how badly you need those items.
If you can wait until you're able to pay cash, send a check in the total amount to your credit card company, then make the purchase with the card.
You maintain high credit scores, and don't pay interest on purchases that way.
I recently got this message from my granddaughter: "I've been trying to find ways to build my credit.
At this point in time, I have no credit whatsoever.
The problem I've found is that it seems you have to have credit in order to build credit.
Every way I've thought of, I am not accepted for it because I have no credit in the first place.
(I hope this makes sense.
It's very confusing to me.
) Anyway, I was just wondering if you had any advice or ideas on how I could build my credit.
If so, I would gladly appreciate any advice I could get.
" Building credit when you're young is potentially dangerous, and I understand that for a student in college (where my granddaughter is at the moment) having a good credit rating is valuable.
I took a few moments considering her predicament, and finally arrived at the following advice: As far as credit is concerned the first thing I recommend is be very, very careful with it.
One good idea is use it only when necessary, and pay the debt off as fast as you can.
Keep in mind that the lending institutions tend to give more credit to those in debt, and you don't want to go there.
At the same time they give better interest rates to people who pay their debt quickly.
Here's what I did to establish my credit when I started my adult life: I needed a car, but had no credit.
I borrowed $300 from a lending institution.
Because of that debt a bank loaned me the money to buy the car.
I used the $300 as part of my down payment on the car.
My advice to you is getting a credit card with a low limit to start.
Use it for a few minor purchases.
(Just be sure to pay the balance in full each month so you don't incur interest.
) After a few months your account history with that card company creates your beginning credit.
You should be able to get a student credit card through your bank.
I know you're working your way through school, but I don't know if you have a bank account yet.
If you don't, try to open a checking account, put your earnings there, and pay your expenses from that account.
That will help you get the credit card.
As soon as you have the chance begin placing money in a checking account, get rid of the credit card, and use a debit card on the checking account.
Debit cards are great.
No interest, and you use money you already have.
Everything you buy that way is cheap.
Keep this in mind: If you use a credit card to buy a pizza, and make only the minimum payments each month on the balance for that charge, the pizza ends up costing you over $100, and takes you 15-years to pay it off.
Our society requires that you own a credit standing.
(Just try buying an airplane ticket with cash, and see what hassles you suffer.
) Owning a good credit rating is valuable, but too many of us don't properly control our credit, and quickly find ourselves in trouble.
Before you make any purchases on credit think long on how badly you need those items.
If you can wait until you're able to pay cash, send a check in the total amount to your credit card company, then make the purchase with the card.
You maintain high credit scores, and don't pay interest on purchases that way.
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