Establishing credit. To establish credit, get a credit card during college and start a savings account. Many credit card companies target high school and college kids with the opportunity to receive credit...
Many credit card companies target high school and college kids with the opportunity to receive credit without having an existing credit file. After you graduate from college however, they want to see some kind of credit history before offering you an account. They would like to know that a person who applies for credit has developed some long-term stability. You need to have lived in the same place for at least a year. Many require a two-year residence. You must also have worked at the same place for at least a year or two to prove that they are not taking too big a risk on you. You have to be prepared to pay a little extra at first, because they are taking on a risk.
Another way to establish credit is to have a relationship with a financial institution through a savings account. Have a savings account that allows you to borrow against your savings. Credit companies won't have to take as big a risk because you have money in your savings account to use as collateral. The most important thing is pay your bills on time.
I would suggest that any consumer attend a financial wellness class. There are agencies all over the country who offer them. I think it should be mandatory for students, but there are only 14 states requiring it. It's important for you to understand how money works first, because if money doesn't work, credit doesn't work either. A lot of people come to us and want us to help them get their credit worked out. When I tell them we need to talk about their money first, they say their money is just fine. They don't get it. It's both. Money and credit are intertwined and if one doesn't work the other doesn't work.
