By David Pilley on January 5, 2012
.jpg.aspx) Having no credit can be just as harmful as having bad credit. If you’re going to make a big purchase in the future, such as a mortgage loan, a good credit score may help in the process of approval. You could spend your entire life in an apartment, that’s perfectly fine. However, if you have dreams of a home on the beach or in a cozy neighborhood, you’ll need a line of credit to show you are responsible with money. The earlier you start using money, the better, but don’t just settle for the first credit card you find.
I can’t tell you that American Express or Visa or Discover is the better credit card. However, I can tell you that a secured credit card is the best card to use in establishing credit. A secured credit card involves a deposit, and the credit limit on the card will usually be at or a little below the amount of your deposit. With a few consecutive months of timely payments, the card issuer may reimburse you with your deposit to make it an unsecured account; however, the main goal of a secured credit card is to build a good history. It’s an optimal choice for establishing or re-establishing your rapport with lenders.
If you are new to the credit world, ask someone with experience. Maybe you have a parent with an individual account, or both parents may share an account, or your new spouse has an account. Whatever the case, if you can’t get a card by yourself, you can ask the experienced person if you can be added as an authorized user. Becoming an authorized user can be metaphorically compared to riding a bicycle with training wheels. You’re doing the pedaling, but someone is there to watch if you fall. While you are not the cardholder, you are allowed to use his/her card. The status of the account will affect everybody using the card, so it is an opportunity to learn both the good and bad of the credit world. Note: If a parent or spouse allows you to become an authorized user, BE RESPONSIBLE. Do not go on rampant shopping sprees, running up thousands of dollars in debt. Abusing your authorized user status can cripple your social relationships along with your financial history!
Whether you get a card from a widely recognized company or your local credit union is not the main issue of healthy credit. The main issue is to understand your card’s terms. Try to find a card that does not charge an annual fee. Find a manageable interest rate, somewhere in the ten to twenty percent range. (Having a teaser rate of 1% might be nice now, but make sure you can handle it when the introductory period ends.) If you’re an authorized user, make sure the cardholder is also using his/her card wisely. If you’re a cardholder for the first time, ask your parents for advice. Finally, make sure your credit card reports to the three main credit bureaus Equifax, Experian, and TransUnion. You may be responsible with the card, but you won’t reap any benefits if it is not properly documented. Never exceed your credit limit; never even come close to exceeding your credit limit! Follow these rules, and you may have a best-case scenario in your first venture into the credit world.
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