how do i start to earn credit?

Question

I just turned 18 and I want to establish good credit what would be the best way for me to start it?

Answer 1

When you don’t have a credit history, it can be difficult and frustrating when trying to obtain a credit card or other type of loan. Establishing your initial credit history can be a Catch-22. If you don’t have credit, not many places are willing to give you credit, yet how can you ever establish credit if nobody is willing to give you any?

Understand What Lenders Are Looking For
Since you are looking to establish credit for the first time, lenders can’t look to your FICO score to determine whether or not to lend you money. In these situations they have to examine other factors that can help them decide if you are a credit risk or not.

Bank accounts. You don’t need a credit score in order to open a checking account at your local branch. Since it doesn’t require credit to open, it also doesn’t get reported to the credit bureaus to establish any credit. Even so, your account history can be a vital component when lenders consider giving you a credit card or loan for the first time.


Employment history. Another important factor lenders look at is your employment history. They want to see if you are able to hold a job or if there are periods of unemployment. Your ability to hold a steady job can improve the likelihood of getting approved.


Residence history. Lenders will also look to see how often you move and whether you rent or own. As with employment history, it pays to have a stable residence. Owning a home, even if just jointly with a spouse, carries some weight as well.


Utilities in your name. Even without a credit history, it is possible to sign up for many utilities in your own name. Having an electric or gas bill, telephone, cable, or water service in your name also helps. Just having your name on these accounts won’t establish a credit score, but it can be helpful for first-time borrowers.
Start With Your Bank
There are a few things you can do that can help in your quest for establishing credit. The first thing you should do is open and maintain a checking and possibly even a savings account at a local bank. This is helpful in two ways:

When you have active bank accounts in good standing, you are proving that you can manage money. While bank accounts aren’t typically a part of your credit score, lenders can use this information to determine whether or not you are a credit risk.


Establishing a relationship with a bank will improve your chances in obtaining a loan or credit card through them. If you already do business with a bank, they should be the first place to look. They know you and they value your business. This existing relationship should carry some weight when seeking credit.
Consider a Department Store Card
You’ve probably been shopping at the mall and been asked if you’d like to sign up for their store credit card to save 10% on your purchase, but politely declined. Generally, store cards are a bad idea because they lure you in with that up-front discount, and then the ongoing interest rate is very high.

Avoiding these cards is typically a good idea, but the ease in obtaining one may actually be a good thing if you’re having trouble establishing credit. If you have struck out at the local bank, you may want to consider checking with one of the local department stores and see what type of cards they offer. Whatever you do, make sure you find out whether or not they report to the credit bureaus. If they don’t, it will do you no good.

If you are approved for their card, you need to be disciplined and use it properly. Don’t treat this new purchasing tool as free money, but only as a means to establish good credit. The limit will probably be low anyway, but you should make an initial purchase with it and subsequently pay the balance off in full. Once the card is active, it should begin to be reported to the credit bureaus. It is now important to maintain a good payment history on this card so your credit history can build upon it.

When All Else Fails
If you’ve tried the bank, department store, or even credit card companies directly and failed, not all is lost. Secured credit is a last resort, but it is much easier to obtain than unsecured credit.

When a credit card or loan is secured, it means that there is an asset linked to the account that the lender can take if you fail to make payments. When you have a mortgage or auto loan, these are secured loans. If you fail to make payments, the lender will take your house or car in order to satisfy the debt.

You can establish the same thing at most banks with a secured credit card. You can pledge money you deposit in an account to secure the credit card. For example, you could obtain a secured credit card with a $500 limit if you put a $500 deposit in the bank that is linked to the card. If you fail to make your credit card payments, the bank takes your deposit.

Again, you want to check and be sure that this secured credit is reported to the credit bureaus, but if so, this can be a useful tool to establish that first piece of credit history. After you maintain that account in good standing for a while, you may be able to obtain a regular credit card or loan.

Establishing Credit is Only the First Step
Establishing a good credit history takes time. There are no shortcuts or tricks that can take you from no credit at all to a high score in a matter of months or even a few years. Your credit score is based on a number of factors such as payment history, length of time you’ve had credit, and much more. So, while it is important to initially establish credit, it is even more important to take the time to do the right things to maintain good credit.

Answer 2

I had this problem too, and I tried taking out small loans and getting credit cards, and none of the attempts that seemed practical were approved. Apparently, having bad credit is better than no credit at all.
Best way is to have someone, preferably a family member, with good credit co-sign a loan on a cheep used vehicle. Be careful with the payments though, if you miss a payment they loan company will hound the co-signer and possibly destroy their credit too.
I didn't have anyone who could co-sign for me, so I had to pull a loan out of one of those "guaranteed approval" places, and got one at 22% interest, which is very bad.
It built up my credit fast though.

Answer 3

I always suggest that you start with a secured credit card. You keep money in a savings account, and use the card exactly as you would a credit card. Then you have a history, and you can apply for a "real" credit card.

Also, definitely open a student checking and/or savings account at the bank.

Answer 4

stay away from credit cards and dont obsess with your fico (I Love Debt) score.

Live on less than you make. Pay as you go and you will win with money.

They only reason you need a high I love debt score is if you plan on borrowing lots of money and pay lots of interest.
The only thing you might need to borrow for is your home. You can get a mortgage with a 0 fico score. It's called manual underwiting.
Save your money and buy a cash car. They get better gas mileage if they are not dragging a payment book behind it.
Save for an emergancy fund.
No Payments = cash in the bank.

Debt Free is Definitely the way to be!
Love me or hate me, You know im right!

Answer 5

1) Open a checking account. Make sure you always have a little money in it -- avoiding over-drafts (bounced checks).

2) If your parents agree, ask to have your name added to one of their accounts. As they make on-time payments, your credit rating benefits. If they struggle to make payments, this could do more harm than good.

3) Open ONE (just one) credit card. Use it once or twice a month, and pay it in full each month.

4) Pay your college bills (phone, internet, etc.) on time -- they all count toward credit, because you avoid collections agents.

Answer 6

To establish credit take out a loan from your bank. Pay it back consistantly over a year or so.

Answer 7

1 job 2 debit card 3 credit card. It depends how it will be used (paid on time!): I found interesting information about your answer & the best credit card options here. http://all-debt-consolidation-loan.blogspot.com/2007/07/chase-credit-cards.html