Sunday, January 07, 2007
How to Establish and Build Credit
College students will have an easier time building credit than non-college students. Simply being enrolled in a university is apparently good enough for banks to start offering special student-deal credit cards, many of which you can find offered around the campus. Definitely take advantage of this opportunity to quickly establish a credit profile by having a major credit card. In addition, financing your education in the form of student loans are many people’s very first line of credit. Student loans are just one heck of a good deal (usually), and are an excellent way to get your credit report started.
Non-college students don’t have it so easy. They will have to slowly build credit the traditional method, starting with those companies who are willing to extend credit to those whom have none. Chief among these are furniture and jewelry store financing. Those are both good bets for your first piece of credit. Low-end department stores will also usually approve young people with no credit for a few hundred bucks. Get those cards and buy some clothes on credit. Make the payments on time.
Anyone with a job can qualify for some type of car loan. So ditch the teenage beater and get yourself a nice new mini-truck or something, and finance it. If you have no credit yet, you will definitely pay through the nose in interest rate. For that reason, it’s best to first establish a few pieces of credit with furniture and jewelry stores, plus those lower end department stores. Either that or have your parents co-sign the car loan. You will build credit as you make the payments on time.
After you have the car loan and a few other minor pieces of credit, it’s just a matter of using the credit you have wisely for 6-12 months. (You might also want to have a gas station card for putting gas in your car, as these are pretty easy to get.) At that point you can apply for major credit cards. You should pick a half dozen or so and apply for them all at once – that way each credit card company won’t know about all the other applications by seeing previous “inquiries” on your report.
You will most likely be approved for a few cards, with credit lines between $1,000 and $3,000 each. Use the cards! Pay for food, gas, minor purchases, etc. with them and make the payments on time. Don’t over-use them! You want to be able to pay them off whenever you want, and in fact you should pay them all off after a few months of using them. At that point just use one of them for everyday expenses and pay the balance off each month.
In a few more months you can apply for credit line increases. In fact, you will probably start getting offers in the mail for better and better deals. Your first Gold Card will be something to be proud of. Take good care of your credit and it will take good care of you. Credit lines can be used to finance business start-ups, moving expenses, and unforeseen circumstances. They can be a cash reserve that allows you to sleep at night – that is, if they aren’t bogged down with balances. Your ultimate goal is to have a ton of available credit that you never use.
Andrew Kasch is a personal finance expert who has financed many small-business ventures with credit cards over the years. To learn more, visit his website at: http://www.establishcreditnow.info
Every college or university student should apply for students credit cards only. Such credit cards give special great terms and benefits. These terms will really helpful for starting credit history. I have applied for my card at credit-spy.com