How to Establish Credit

If you manage it well, credit can help you get the things you want, such as an education or a car. Soon, you may be ready to start building a credit history.

Once you prove to lenders that you’re a responsible borrower, then you’ll have access to affordable financing for the things you need. Here are some things you can do to get the credit you deserve:

1. Open a savings and checking account and use them responsibly. If you save money on a regular basis, you’re proving to a lender that you know the value of your money. A credit union is a great place to start your accounts.
2. Have a parent or other adult co-sign your credit application if you don’t have an established credit history, a down payment, or enough time on a job. A co-signer acts as a reference for you and promises to repay your loan if you can’t.
3. Consider share-secured loans and credit cards. Here’s how they work: You open a savings account with a balance equal to the amount you want to borrow. Your account serves as security or collateral. If you don’t make your monthly payments, the lender can take the amount you owe from your savings.
4. Make as large a down payment as you can afford. It not only shows the lender you’re more likely to repay the loan, it also reduces the amount of interest you’ll pay over the term of the loan.

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