Things You'll Need:
- Checking account
- Savings account
- Job or other source of income
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Step 1
If you have want to establish credit, you need to first open a checking and savings account. Many banks offer free checking and savings account. Shop around for banks that offer free checking and savings. You don't want to spend your money on banking fees. Also ask the bank for a debit card.
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Step 2
One way to establish credit is to borrow money against your savings account. Your savings account is used as collateral in the case that you default on your loan. For example, if you have 750.00 in savings, ask for a 500.00 loan. You will not be able to touch the 500.00 until the loan is repaid. Once the loan is repaid, you still have your 500.00 in savings. You can also use the loan proceeds to pay the loan. Put the 500.00 aside and use money from it each month to pay your loan. You will have to pay the interest but that is part of the price of establishing credit. Make sure you make your loan payment on time each month. If possible, ask that the loan payment be taken automatically each month out of your checking account. This way you know you will not be late on any payment.
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Step 3
Apply for a secured Visa or Mastercard. There are many websites that give information about secured Visa and Mastercards. Shop wisely and find a card that has a low annual fee and low or no monthly fees. Your credit line will be determined by how much deposit you give them as collateral. For instance, if you pay a deposit of 250.00, your credit line will be 250.00. Check with the credit card company to see how many on time payments need to be made before the deposit will be waived and returned to you. Most credit card companies pay interest on your deposit also. You have to use your credit card to build a credit record with the credit card company. Make small purchases that you can pay off each month. This will help you avoid paying interest on your purchases.
