Best Way to Establish Credit |
By Ashley Russell on December 17, 2011
.jpg.aspx) Modern America revolves around credit, and after the recent credit crisis that led to the "Great Recession," credit is often hard to come by. Credit is important for individuals to have for a variety of reasons, from things as simple as simplifying purchases to as vital as financing life's needs such as houses and cars. For those individuals who have low to no credit, whether because they are young adults who have not had a chance to build credit over time, or someone who made some poor life choices and need to rebuild their credit, here are some tips to help establish good credit.
One great way to establish credit is the use of secured credit cards. Secured refers to the fact that the card is "secured" by a collateral account. This account usually has to have a minimum of a couple hundred dollars. If the individual pays on this account, as they would with a normal unsecured credit card, they will experience the same benefit on their credit report as a normal credit card. The negative with these cards is that individuals are basically paying their line of credit through the collateral account, and companies often charge annual fees with these accounts.
Other possible sources of establishing credit are retail and gas cards. These cards are great because they are easy for people to attain. Retail cards also offer in store discounts, so if individuals shop in the same store often then that can help individuals save even more money. One problem with these cards is that they have extremely high interest rates, and individuals can easily get into trouble if they cannot pay off their charges on time.
Another option is student credit cards. For those individuals still in school they can take advantage of cards that companies offer directly pointed to help college students safely develop their debt. These cards often have low to no annual fees and low credit limits. They do often have fairly high interest rates, however, so individuals need to be sure to not spend outside their of limit.
Overall there are many ways for individuals to establish good credit. If individuals start working on building their credit early, then they will not have as many obstacles to overcome when they go to by their first house or car. Individuals need to be sure to keep up with all of their payments with the cards they use; otherwise, they will do more damage to their credit than good. |
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