Building my credit for the first time can feel a little like the chicken in the egg. To build a good credit score you going to need to take out a loan or get a credit card, but you can’t qualify for a loan or get a credit card without some credit history right so what are you doing in what store?
Let’s first start with a bank account. You don’t really need a long credit history to open a checking account at your local Bank in fact you may have one already even though a checking account won’t necessarily help you build credit history with the bureau’s that account may help you get your first credit card or loan from the same provider. You see if you already have a history of doing good business with the bank they know you and value that business. That existing relationship can carry some weight when it comes time to get your first line of credit. That is a good first step but if that’s still not enough here are a few other things to consider.
some banks offer credit cards for folks who want to establish, strengthen, or even rebuild their credit. It’s called a secured credit card because you secure the amount you borrow with the security deposit in other words you provide collateral by depositing money in an account with the bank. Sometimes the lender gets to apply a portion up or all of it should you default on the loan your credit line is equal to the amount you deposit. You won’t be able to touch that money or use it to pay off your balance and you’ll still have to prove to the bank that you have sufficient income to pay the credit card. The good news is that the bank will be more confident that you’ll pay them back even without a great credit history, to begin with, allowing you to build or rebuild your credit.
To build your credit you want to make sure that once active your lender will report all those on-time payments to the bureaus before you apply. Most banks and credit unions do this, but some retail store cards, for example, don’t. Therefore, make sure to check ahead of time and if your payment history won’t be reported by the card issuer you may want to keep shopping for another card.
Another way to build credit is to see if there’s someone who might be willing to cosign a loan with you this can be any adult who is credit-worthy including your parents or spouse. When someone co-signs alone you get the benefit of their good credit history and this may help you get approved you can then build your own credit with a good history of payment on the cosigned account. Whoever cosines the loan for you is taking on a really big financial responsibility they’ll be on the hook if you run into trouble, so it’s not something you should ask for lightly. When you do get credit extended to you it’s important to keep managing it carefully even after you’ve built a history you’re doing the right thing by getting off on the right foot
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