How to Establish First Time Credit

Building a credit history is just as important as using credit responsibly. If banks don't have proof that you are a responsible borrower, they are more reluctant to issue loans to you at reasonable rates. This affects your ability to buy a car or a house or to make other large purchases. One of the best ways to establish your credit is to get a low limit credit card while you are young.

Instructions

1

Apply for a basic credit card through a bank. Getting credit on your own for the first time is difficult if you have no proof of income and no credit history. The lender wants to see that you can meet payment obligations. Parents with income and good credit can help their teens or young adults by serving as a joint applicant or co-signer on the application.

2

Ask for a low balance. You might not have another option anyway, but since your goal is to build credit, you want to reduce temptation. Some banks offer low balance cards specifically for teens or college students. You can ask for a balance of $300 to $500. This minimizes the potential of getting yourself into big trouble as you learn to use credit responsibly.

3

Make monthly purchases. Having credit is one thing, but you have to show you can use it wisely. A common recommendation is to make small purchases each month that you know you can easily pay off quickly. Fill up your gas tank or buy some groceries to use credit on essentials.

4

Make your payments on time every time. Payment history accounts for 35 percent of your credit score. Debt-to-limit ratios also impact 30 percent of your score. This is the percentage of your available credit currently in use. One of the worst things you can do is make late payments. This defeats your purpose of trying to build good credit. What you want to do is show that you can make timely payments. This subsequently keeps your debt-to-limit level low, also helping your credit score.