Congratulations, you have graduated high school, you have a car, a goal and a lifetime of opportunities now is the time for that pesky responsibility to kick in. You have been accepted into your first choice school, you are officially a college student, but what’s the next step? You see, right now is the perfect time to start something that will follow you for the rest of your life—your credit. Most incoming college freshmen have no credit, or are just beginning to get their feet wet, so to speak, with perhaps a low balance credit card, or a car or cell phone payment in their name. But this is the time where credit can become quite useful, so how do you build credit for the first time?
One easy answer to this question is to open a bank account, you may have to have a parent or friend with good credit co sign for you, but that is a good thing about building new credit, you don’t have to go it alone. Bank accounts don’t show on your credit report, but lenders request it to see that you have made good money decisions in the past if you have little to no credit history. Your bank account not only shows withdrawals, it shows a (hopefully) steady flow of income. But keep in mind that negative news will be reported on your credit score, so keep those checks from bouncing.
I mentioned income before, another good idea to establish yourself in the world of credit is to get a good job and keep it. On your credit report there is a section entitled “identifying information”, this section keeps track of your employment history. This information is pertinent because is gives prospective lenders an idea as to who you are and whether or not you can hold a steady job. It shows stability to get and keep a good job; it shows that you are capable of bringing home the bacon necessary to pay off the loan you are trying to be approved of. This information also shows your income, a person making minimum wage is not going to be able to keep up with the payments that a CEO of a huge company would.
Many people also think that applying and paying back a small loan is a good way to establish credit. Banks and lenders make funds available, that you may or may not qualify for, to go towards buying a used car, paying for an appliance, or even a vacation. This type of credit is known as installment credit, because you pay back what you owe in installments with interest.
Probably the most important bit of advice in establishing credit is; Don’t Screw Up. Negative reports take a long time to make amends for, and collection agencies engage stresses you don’t need in your life. And on top of that, if you trash your credit it could mean taking years longer to get the car or home of your dreams.
Author Resource:
"Your" Money Matters By Carl Hampton Author of "From Credit Despair To Credit Millionaire" http://www.carlhampton.com
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