Building credit for the first time

By Sara Keen
Recently, I found myself in desperate need of a new car, and unfortunately I needed a loan to purchase anything for transportation.
Loans require a credit history, which is based on previous transactions, such as credit cards, car loans or even apartment rentals.
One recurring thing that I heard and read when I was working on starting my credit was the one thing that tends to scare us: the credit card.
As Judy Woodard of Macon Bank and Trust explained, credit cards are basically a recurring credit. Each month, it reports that you owe and have paid on (hopefully) your credit limit.
For example, each month someone may have $600 reported and “paid for” to build your credit history based on their $600 credit limit.
There are many different credit cards available, featuring cash back rewards, travel miles, and even some breaks for certain people.
If you are a student, for example, you can most likely apply for a student credit card. Many of these offer cash back rewards for buying gasoline, going out to eat and using popular shopping websites or stores.
Student credit cards also typically offer cash back or miles for good grades. For example, Discover It Student Cards offer $20 for a GPA of 3.0 or higher, and Capital One has a student Journey card for those who like to or need to travel to receive help from their GPA.
Students can also try what are called secured credit cards.
“A secured card is backed by a cash deposit you make up-front; the deposit amount is usually the same as your credit limit,” according to nerdwallet.com.
Secured credit cards are meant specifically for those wanting to build credit, and the down payment is used as a collateral if a payment is missed.
For those who have trouble saving up with a typical savings account, you may also look into a credit-builder loan.
The loan, in this case, is held by the lender until you pay it back, making it a good way to “save” some money by investing it into a larger sum for later on.
“It’s a forced savings program of sorts, and your payments are reported to credit bureaus,” added nerdwallet.com.
For bigger loans, you can also look for a co-signer. A co-signer is a person who signs with you on a loan to help pay it off if you find yourself unable to do so.
However, not every person wants to risk their credit to help someone else build credit. It is important that you establish yourself as dependable and keep up with your payments if you have a co-signer. They “put their credit on the line” to help you.
Co-signers tend to be the family of younger people. As I mentioned before, I needed a car and had little-to-no credit whatsoever, so my mom co-signed my loan.
This means that if I fail to make my car payment each month, then it falls on her to take care of it.
Building your credit is a very lengthy process, and there are some hurdles to jump before you get there. However, it does pay off long term when you need a car, are looking for an apartment or even looking to purchase your own home.
It is good to begin young and build a strong credit history, so that you are not stuck needing credit in the future.