How To Build Credit for the First Time - NFCC Financial Education ...

By Melinda Opperman

Credit counseling?services usually help those who have already established credit and gotten in too deep with debt. Our primary function however is to provide education and promote financial literacy, and that includes teaching new consumers how to build credit from the start.

Step one is to apply for credit. If you?ve never had any kind of credit account, or if you?ve never been included on another consumer?s account as an authorized user, you might run into difficulty at the outset. For most credit underwriters, having no credit whatsoever is essentially the same as having bad credit.

When deciding whether or not to grant credit to you, credit grantors are looking for some verification that you will repay the money they lend you. An established credit report gives them the information they need to make a decision. New consumers without an established credit file have no such info to offer so if creditors decide to lend to you they will charge you the highest interest rates and fees.

I?ve?long recommended a gas station credit card as a good starter card. It?s harder to get into deep debt trouble with a store card, and a gas card will be used regularly which will help build a solid credit rating. Another option that used to be common for new consumers was to get a consumer loan from a retail store; usually a major appliance purchased with installment payments would help consumers quickly build a credit history. These days, most retailers have their own store credit card rather than installment plans for their major products. These store credit cards might be easier to qualify for, and if they can only be used at one retailer?s stores you?re less likely to accumulate so much debt that you?ll end up in credit counseling.

If your lack of a credit history keeps you from getting approved for any kind of credit card then you?ll need to start with a secured card. Secured cards are ?secured? by a deposit you make. You might deposit $500 in an account, and you will be granted $500 worth of credit. There?s no risk to the lender because if you don?t pay they can take the money you owe them from the deposit account. However, if they are forced to do this your credit will be devastated. The point of the secured card is to prove you are ready to handle credit and will repay your debts. After a year of paying your bills as agreed your secured card may be converted into a full-fledged credit account.

Whatever account you open?my advice is to start with only one account, and make all of your payments in full and on time. Don?t take on more debt than you can handle, and don?t apply for a second card until your credit history is well established with the first. When you?re ready for your second account, make it something different from an unsecured credit card; a small auto loan, perhaps. That mix of different kinds of accounts will be an extra boost to your growing credit score.

Melinda Opperman is Senior Vice President of Community Outreach & Industry Relations, Springboard Nonprofit Consumer Credit Management, Inc; and Executive Director, Springboard Education Foundation. Springboard Nonprofit Consumer Credit Management is a member of the National Foundation for Credit Counseling. To schedule an appointment with a certified financial counselor call 800.431.8157, or visit Springboard?s?website at www.credit.org.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

Source: http://financialeducation.nfcc.org/2013/01/18/how-to-build-credit-for-the-first-time/?utm_source=rss&utm_medium=rss&utm_campaign=how-to-build-credit-for-the-first-time

california earthquake california earthquake tyson chandler tyson chandler stephen hill draft tracker the pirates band of misfits