For the average job-holding, nine-to-five adult, the biggest question when it comes to credit is “Is mine good or bad?” But for many college students, the more pressing question is “Where do I even start?”
The scene: Jason, a fresh-faced recent college graduate gets a new job and decides he probably will need a car to get to work. He finds an affordable, reliable vehicle but has to finance it because he does not have enough money saved to pay for it outright.
The problem: He’s rejected for financing not because he has bad credit, but because he has no credit.
This scenario plays out all too often for college students and many other young people taking their first few wobbly steps to financial independence, but there are several ways to prevent it.
Step 1: Know Where You Stand
Just because Jason had no credit doesn’t mean that every college student is stuck in the same conundrum. Many students may be making credit histories without even knowing it.
Ever had a student loan? The many college graduates drowning in student loan debt might have more credit to their names then the lucky few who graduate debt free. Basically, anything that requires monthly payments could build credit. Think back to loans, gym memberships, rent checks, and the like.
Everyone is granted one free credit report per year. Take advantage of this service by using a reputable credit-reporting bureau, such as Equifax, Experian, or TransUnion.
Step 2: Get a Credit Card
This part can be tricky. The credit conundrum can prevent people like Jason from getting credit cards simply because they have no credit. So how are they ever supposed to build their credit?
Most banks offer secured lines of credit to their customers. This means that account funds are used as collateral should credit holders fail to make payments.
Store credit cards often have more lenient requirements and lower credit limits, so they are also a good first step to establishing credit—as long as they’re handled responsibly!
Step 3: Take No-Interest Offers in Stores
Ever seen the “same as cash for 90 days” in-store offers on big-ticket items? It’s easy for them to sound like scams, but they’re not. Just be sure that you have the right amount of money, and sign up. This is, in essence a loan, and, if you make good, regular payments, it’s a no-extra-cost way to establish some credit.
Many of these offers have time limits set before you will have to start paying interest, so be sure to read the fine print with any of these offers to avoid getting in over your head.