Where to start when you need to build credit

1. Getting a good job
A Part time or Full time job shows creditors you have the ability to repay any debt incurred.   This is also crucial when trying to buy a home or borrow money because lenders like to see a solid work history from the customers applying for the loan.

2. Open a bank account
This seems very basic because it is very basic, but you must know that it is very important to show that you have the ability to manage money, well a bank account shows just that.  Negative or positive it will show!  Don’t use a debit card to pay for items, use a credit card see number 4.

3. Get a small loan
Student loans are a good start especially for someone young who typically starts out in school anyways, these loans are easy to get and have very low interest rates.  Or get a used car and get it financed. Notice I said used; please don’t go and buy a brand new car, a new car typically costs significantly more and it could eliminate you from getting a home.  Many people when they are 18 get a brand new car for $25,000 and finance it over 5 years. Then in two to three years; the car payment will be on your credit report and will typically take up a lot of your monthly income.  If you need to get a co-signer then that is just fine, this will help build credit for you and them.

4. Get a Credit Card
Open up a credit card of some sort, retailer, secured or if you can an unsecured credit card.  The reason you want a credit card is because credit companies report your activity to your credit bureau that puts together your report, paying everything with your credit card and debit card is crucial.  If you show that you pay every month consistently then you will start to build good credit!  Make small purchases and pay them off; say you buy your groceries and they cost $200 a month, well pay that off before your bill is due.  Keep doing that over 6 months and you will see a good credit history being built.  DON’T max out the credit limit on the card ever!! If its $500, have a rule to pay the card off when it hits $350.

5. Avoid applying for numerous accounts.
Each time you apply for a credit card or loan, your credit score takes a small hit. And there’s no point to chipping away at a credit score you’re trying to build up, especially when you haven’t yet demonstrated that you can handle just one credit card. Instead, use that energy to prove to yourself that you can keep the balance low on one credit card and pay the bill on time every month.

6. Pay your bills on time
Don’t have a late payment for anything, even if you’re only 30 days late you will be reported to the credit agencies that you paid late and it will have an adverse affect on your credit!  Remember if pay on time, you will save in time!

7. Check your report
If you are just starting to work on credit and you have none of the above you do not need to pull your credit report to see your scores because you have nothing on them to show a credit history unless you suspect identity theft or any other reason I wouldn’t pull credit until you have completed the above steps for 6 months or longer.  But if you have then I would check your credit report, you can do this one time for free each year by going to https://www.annualcreditreport.com/index.action, however this will not show your credit scores just your history that has been reported by creditors. You will need to find a trustworthy site to view your credit scores on and you can find them on any search engine and look at their reviews to make sure they are reputable.