part 2: how do i get credit?
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Applying for credit for the first time...
When you apply for your first credit card or loan, lenders try to determine how likely you are to pay bank what you borrow. They look at a lot of different factors, but start by following these guidelines: |
INCOME
It's hard to pay back money if you don't have any. A bank may ask to see pay stubs or proof that you can repay.
CONSISTENCY
For credit cards, there's a minimum due every month based on how much you've borrowed. Lenders want to make sure that you can pay every time.
EXISTING RELATIONSHIP
If you already have a checking or savings account with a bank, they know something about you and may be more likely to give you that loan or credit card.
NOT TO MUCH!
Start small and manage your credit well, and later on you'll be able to borrow more.
It's hard to pay back money if you don't have any. A bank may ask to see pay stubs or proof that you can repay.
CONSISTENCY
For credit cards, there's a minimum due every month based on how much you've borrowed. Lenders want to make sure that you can pay every time.
EXISTING RELATIONSHIP
If you already have a checking or savings account with a bank, they know something about you and may be more likely to give you that loan or credit card.
NOT TO MUCH!
Start small and manage your credit well, and later on you'll be able to borrow more.
There are many types of credit...
All of them can help you build a strong credit history. Some are common. Others are more rare. Let's learn more about them.
All of them can help you build a strong credit history. Some are common. Others are more rare. Let's learn more about them.
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CREDIT CARDS
A credit card lets you borrow money from a lender to make purchases and then pay it back later. The amount you pay back each month depends on how much you borrow. |
STUDENT LOANS
Loans used to finance education. You borrow the money, generally each school period, and pay it back in fixed payments after you finish school. |
CAR LOANS
If you own a car, you make a fixed payment every month over a preset period of time. |
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RENT
Even though it's not a form of credit, your rent can be reported on your credit history. That means if the rent is in your name and you are making your monthly payments on time, you could be building your credit history right now. |
SERVICES COUNT
You make payments on monthly bills like utilities, cell phones, and gym memberships. Although these aren't types of credit, sometimes your payment history on these can impact your overall credit history, especially if you miss payments. |
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SECURED CARDS
A secured card is a special type of credit card that requires a security deposit as collateral for your account. That means you deposit an amount of money up front and the bank holds it for you. Then when you use it, it helps build your credit history. |
Starting with a secured credit card...
If you are having trouble qualifying for a credit card, a secured credit card could help. A secured credit card requires a security deposit, with is held as collateral for your account and cannot be used to make payments.
It's a smart way to begin to establish a good credit pattern, because unlike a debit card or a prepaid card, secured credit card payment information is reported to major credit bureaus. Then, as you build a positive history, you can qualify for other forms of credit in the future.
If you are having trouble qualifying for a credit card, a secured credit card could help. A secured credit card requires a security deposit, with is held as collateral for your account and cannot be used to make payments.
It's a smart way to begin to establish a good credit pattern, because unlike a debit card or a prepaid card, secured credit card payment information is reported to major credit bureaus. Then, as you build a positive history, you can qualify for other forms of credit in the future.
