How to Establish Credit at Age Eighteen
You have reached the age of 18, and pretty soon you will no longer depend on your parents for your basic needs. You may need to make big purchases in the near future. In order to make big purchases, you need to have a satisfactory credit record. You will probably not be able to purchase a house or a car in cash, but you can apply for credit at a bank. Before the bank will loan you money, it will look at your credit history. By establishing credit, you can prove to a bank whether or not you pose a credit risk.
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Instructions
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Open checking and savings accounts in your own name. The proper handling of these types of accounts can show creditors that you know how to manage money. By managing a checking account, you can demonstrate that you only spend the amount of money you have available to spend. By managing a savings account, you can demonstrate that you do not spend every dollar you have in your possession.
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Apply for a loan. Many people at age 18 apply for student loans to fund their college educations. You can receive a student loan based on need, and you do not have to pay the loan back right away. However, when the time does come for you to repay the loan, you will be paying that loan with interest. Therefore, it will cost more for you to pay the loan back. Luckily, federal student loans carry low interest rates. The interest rates on private student loans vary.
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Apply for an unsecured credit card. If you are an 18-year-old on your way to college, representatives for credit card companies may bombard you with credit card offers once you make your way onto a college campus. These representatives set up in high-traffic areas on college campuses and give you free stuff like T-shirts in exchange for your credit card application. You should carefully read these offers, and make sure you are not getting in over your head. Many of these cards come with annual fees, maintenance costs and high interest rates. You will have to make monthly payments on any card you receive, and extra fees can cause your monthly payment to rise to a level that you cannot afford to pay as a college student. Take these issues into account when applying for any credit card, whether on or off a college campus.
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Apply for a secured credit card. Probably the safest credit card option for an 18-year-old who wants to establish credit is a secured credit card. In order for you to receive a secured credit card, you must make a security deposit. With a secured card, your credit limit will equal the amount of money you paid as a security deposit. If you miss a payment, the credit card company can use your deposit as payment.
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Tips & Warnings
Pay off your credit cards each month.
Having a credit card may help you establish credit, but missing credit card payments will give you bad credit.
