When it comes to your ability to borrow money, it starts and end with your credit score. But, what happens if you don’t have any credit yet? How do you establish credit so that you can build credit so that you can get credit? Seems like a catch-22, right? Here are some first steps towards building your credit.
Apply for a Secured Credit Card
Secured credit cards available for those with limited credit. To get a secured credit card, you must make a deposit that is held by the issuer and usually matches the amount of your credit limit. Think about is like this – you deposit $500 with a bank and the bank give you a credit limit of $500 to use. This might seem like a game, but really, it is a great way to practice using credit and paying timely. More importantly, your timely payments will be reported to the credit reporting agencies and help you establish a credit history.
Get a Co-Signer
This option might not be available to everyone, but having a co-signer sign on your loan will typically allow you to borrow even without previously established credit. Two caveats: first, your co-signer needs to have good enough credit to quality for the loan, and second, the co-signer needs to understand that they are liable for the full amount of your loan or the amount you borrow.
Become an Authorized User
Similar to a co-signer, you are benefiting from the established credit of another individual. Again, here you need to establish an understanding – you can benefit from the other person’s credit, or you could potentially be hurt if they fail to pay timely.
Open a Store Credit
Many stores have credit available for the purchase of certain items. Don’t confuse this with the very expensive rent to own options in many stores. Instead, look for a store credit card or installment loan for a small ticket item for your first purchase.
Any way you begin to establish your credit, remember – making timely payments as agreed is the key. Get off on a good credit foot, and you will be setting yourself up for many more options in the future.