consolidated debt and secured credit

Establish Credit When You Are Ready

Debt Consolidation and Credit Card Counseling

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Establish credit only when you are ready

Responsibility comes before establishing credit

Establishing credit is certainly an important thing to do when you are young and first starting out in the world of finance. But there is a right way to do it an a wrong way to do it. You should wait until you are prepared to do it right before doing it at all.

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credit card

Establishing credit is important, but you should wait until you can do it right

It can be tough trying to establish credit if you are young and don’t have a history of paying anyone anything. The problem is the old Catch-22 dilemma - how do you get credit if you don’t have some already? No lender is going to give you credit without first checking your credit report. And if they find that you don’t have one, then you’ll have a much harder time trying to get help from a lender. So what do you do?

Many young people, especially college students, find themselves receiving preapproved applications for credit just for being enrolled in college. They foolishly sign up for the cards, without even reading the fine print in the application and then proceed to use the cards for whatever reason they wish. This comes back to haunt them later when they realize that they got a bad deal on the card, with high penalties and interest rates, and that they don’t have the finances to pay off the bill. The result of this scenario, more often than not, is a student who leaves college with his or her credit already ruined.

Sure, it’s nice and easy to just take a card when one is offered to you. But creating a solid credit score is a lifelong job, and you need to start by doing it correctly. The first thing you need to realize is that when you have a credit card, the bill needs to be paid every month. If you cannot afford the items you are purchasing, then you shouldn’t purchase them. And if you don’t have a job or if you don’t have any regular income, then you don’t need an account in the first place.

  • First things first - you need income,. If you don’t have income, then start there. After you have a steady job and some money coming in, then you can start to pursue credit. If you don’t have any preapproved offers coming your way, you can do one of two things:
  • Get a secured credit card - These allow you to have an account that is backed by a $300-500 cash deposit that protects the lender against any default you might make. It’s a relatively easy way to get started and once you pay the bill regularly for a few months, you will see offers for unsecured cards in the mail. 

Get someone with good credit to be a cosigner on your account - It’s possible to have someone with established credit either cosign on your account, or to make you an authorized user on their own account. Either one will help you, but the latter puts the other person at risk if you fail to pay your bills. Use their trust wisely; if someone makes you an authorized user, don’t spend more than you can immediately repay.

The key is having the income - if you don’t have a way to pay the bills, then you don’t have a need to make purchases or have a credit card. It’s that simple.

 

 

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