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How to Build Credit

Building credit from ground zero can be intimidating. Perhaps you’re just getting started in life, or maybe you’re rebuilding. Where do you begin? There are several ways to get started that will put you in the right direction. 

1. Talk with your financial institution 
If you already have a checking account with a bank or credit union, that’s a perfect place to start. Since you already have an account established, you’ve likely shown some history of financial responsibility, assuming you have no overdrafts or other mishaps. Talk to a representative about your options.  

Credit unions are typically easier to work with than banks since they evaluate each member’s need on a case-by-case basis. If you don’t have an account with a credit union, be sure to explore that opportunity. 

2. Get a secured credit card
Secured credit cards typically report to credit agencies just like a regular credit card. The difference is that you are funding the credit card instead of borrowing money. For example, you would deposit $250 in a savings account to get a $250 credit card limit. It’s one of the easiest ways to quickly build credit. It’s also a fool-proof way to build credit. Since you’re funding the account, you’re not in incurring debt.  

Be sure your payments are sent to all three major credit reporting agencies before you get a secured credit card. Lenders are not required to do this, but if they don’t, you’re not building your credit history. 

3. Try a signature loan
You can also apply for a small signature loan with your financial institution. Signature loans are unsecured loans guaranteed only by your signature. They typically have higher interest rates. Be sure you can handle the monthly payment before accepting the terms. If you are not qualified on your signature alone, your financial institution may allow you to secure it by putting money in a savings account equal to the amount of the loan. 

4. Get a co-signer
If you’re unable to secure credit on your own due to age or unemployment, you’ll need a co-signer: someone who will assume responsibility for your bills if you don’t pay them. 

5. Consider a department store account
Credit unions are always the best choice for credit cards; however, if you can’t secure a credit card or signature loan with your financial institution, you could try applying for a credit card account with a department store. They are typically easier to get, but also carry high-interest rates. If you qualify for a department store credit card, use it wisely and consider discontinuing use once approved for a lower interest credit card. 

Source: Money Talks News