Establishing credit history

It’s the one thing that could make or break your financial health: Credit. It comes in many different forms, and it will ultimately define your worthiness as a reliable borrower.

But how does someone who has little to no credit history start to build credit? Here’s three ways you can start your path to establish credit:

Apply for a store-based credit card

Department stores will be one of the first companies who will loan you credit in the form of a high-interest-rate credit card. The important things to remember is to not max out your credit limit, to make your monthly payments on time and to pay off the balance in full whenever possible to avoid paying interest charges when your statement arrives.

Applying for a Shared Secured Credit Card

These types of credit cards are offered at financial institutions and have a credit limit which is secured by money in a savings or checking account or by paying a certain amount of cash upfront as a deposit. For example, if you have $1,000 in an account or put down as a deposit, your credit limit would be $1,000. Be aware that if you default on this type of credit card, the money you use as collateral will be used to pay off the balance on your card.

Purchasing a vehicle

Buying a car can be a double-edged sword for your credit. On one hand, you have a new car! Great. On the other end, as a first-time car buyer and someone with little-to-no credit history, you’ll likely be offered a high interest rate unless you can provide a large down payment. You can end up paying a lot more over the life of your loan so be sure to read the fine print of your loan documents before you sign them.

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