Steps to Establish Credit

Taking steps to establish credit should start early in your life if you intend to buy a house or a car. You need to have a stellar credit rating to get those loans for the big things you want after graduating from college. However, establishing credit doesn't end there. It should be a lifelong endeavor in case you need credit late in life.

Maintain Savings and Checking Accounts

An early way to establish a good credit score is to open and carefully maintain a checking or savings account. You can start doing this before you even start college. The Kiplinger website says to avoid any bounced checks or overdraft issues. These can hurt your credit score. If you keep a clean record on your accounts, it can be one piece of proof to convince a lender you handle money well.

Obtain Credit While in College

Another early way to develop your credit score is to get a credit card while in college. Kiplinger says a secured credit card is good, despite a required $300 to $5,000 deposit. The site also warns that many college students take on too many cards and get themselves into financial trouble early. But if you're a responsible person, it can be a huge advantage if you plan to buy your own home straight out of college. It's best to stick with just one card at this point.

Personal Bank Loan

While maintaining credit in college, Visioncredit.org recommends that you take out a personal loan from your bank. This can also help you establish a good credit record as long as you successfully make payments each month. It's best to take out a small loan for around $1,000. Your bank may ask for collateral using a one-year certificate of deposit.

Retail Store Credit Account

If you want more than one credit card, it is best to open an account through a major retail store or even a gas station. These accounts are easier to obtain than a regular credit card. Maintaining a credit account through these places, making minimal purchases and paying for them on time will account for one small piece of your overall credit score. Kiplinger.com warns to avoid cards with high annual fees or interest charges.

Joint Credit Account with Parents

If you have trouble obtaining a credit card while in college, you can have your name placed on your parents' credit card account or that of someone you trust as a joint user. Through time, you will establish a credit score concurrently with your parents or trusting friend. Of course, it's risky if your parents or friend fail to make their payments on time. This will affect your own credit score.

Payments on Time and Preventing Overuse

After you graduate and buy your home and car with your established credit, Kiplinger.com reminds you to make your payments on time. This should continue through the rest of your life. Additionally, you should not max out your credit cards since it will not only get you into debt, but will damage the good credit score you built and maintained for so many years.