How to develop credit

You will need credit to function well in life. The first step is to have a job that pays you something.  The volunteer setups the hof often arranges are nice but if you plan to make it on the outside, get a real job.  Next start a bank acccount and start saving money.

When choosing a bank, ask if they have starter credit cards.  These require you to maintain a balance of ~$500 and may use the card up to $500. Use the card heavily for small things like food but pay it off each month religiously!  You can set up your account to pay the minimum each month automatically in case you forget to make a payment, which is terrible for your credit.  But don’t just pay the minimum, pay it off completely.  This means treating your new credit card like a debit card, it’s not for spending money you don’t have.

After 6 months of religiously using and paying off your card ask your bank to move you to a regular credit card or increase your maximum, but keep paying it off religiously.  Later a car purchase or student loan will continue to build your credit rating.  Not paying a utility bill like phone or heat will destroy your credit rating.

Credit rating means how much people trust you to pay back loans.  It’s not based on knowing you personally, its computer generated.  Any missed payments, very easy to do, reduces your credit rating.  There are sites that allow you to look at your credit rating but beware, these are money making sites and they want to sell you more than you need.

Over time, if you always pay your bills on time and never default on a loan or bill, and don’t maintain high balances on your card, you will have a good rating and be able to buy a car or a house when the time comes.

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