Why and how to start building credit
Building credit is the same as creating a financial reputation for yourself, to obtain more and better benefits in the future. Those advantages could range from loans to credit cards. Therefore, it is essential to forge a positive image before those who might provide those opportunities for you someday. Where to begin to prove that you are someone trustworthy, financially speaking?
Ask for a secured credit card
To get it, you will be asked to leave a deposit as a back-up. This amount is usually the same as the credit card limit. You can use this card the same way you use a regular one, but making sure the full amount is timely paid, to avoid interests.
Two tips: make sure that its annual charges are low, and that the company sends reports to the credit bureaus. It is also crucial that you maintain the expenses as low as possible (try not to exceed 30%).
Be an authorized user of someone else’s card
You could ask a relative or friend to issue an extension of his card for you. This way, your payment history will be included in your credit files and will allow you to build credit. But beware: you should be sure that the financial institution that released the card sends reports to the credit bureaus.
Ask for a secured loan (or credit-builder loan)
This is a good way to start building credit. It works like this: you receive a loan, but the money you borrow is held by the lender and not released until you fully repay it. Is there a reason to do something like this? Well, it is, as its main goal is to help you build credit. This way, as long as you meet the deadlines, the financial institution that lends you the money could send a report of these payments to the credit bureaus.
Put the bills under your name (and pay them on time)
Putting utility bills under your name and paying them on time, is a good way to build credit.
Check your credit scores and reports
Once you followed the preview steps, you must monitor your credit scores and reports. By law, you are entitled to one free credit report every 12 months from each of the three nationwide credit reporting companies: Equifax, Experian, and TransUnion. To get it, you can go to AnnualCreditReport.com or you call 1-877-322-8228.