Many people do not realize the importance and/or how to start building their credit. In a lot of cases, when a person applies for “major” credit, like the purchase of a home or automobile, or applying to rent an apartment, the business they are working with will want to review the applicant’s past credit history, to see what was borrowed in the past and how that prior account was paid.
Here are a few tips on how to establish a credit score and start building a history of good credit.
There are some credit card companies that will extend to you a credit card with the help of a good co-signer. Once you are successful with this, then start making a couple of purchases each month for things like a meal at McDonalds or purchase a tank of gas for your car on the credit card. The most important thing to remember here is to pay it off each month. Do not charge more than you can payoff. Start off with small charges, like under $50 each month. This practice will show you are responsible in your charging and are paying it off each month. If you cannot pay your balance off each month, it actually does more harm to your overall credit. So just be aware of what you are doing and be smart on the charging.
Another idea is applying for a personal loan with your bank and use your savings account as the collateral. Your funds in your account will be placed on hold until your loan is paid, but you still receive interest on it. If you put your funds in a CD you will earn even more interest. Something like a 1 year loan works great. At the end of the 12 months, you have established a record of having a loan at a bank and paying it off on time and in full. Plus the interest you paid on the loan was actually at a discount because you were earning interest on your CD or savings account as well. Keep in mind you still must qualify for this loan.
These are 2 relatively simple ways a person can start to establish a credit score and develop a credit history. There are more ways and if anyone has more questions just come by the bank at anytime to discuss how we can help.