Tips for Establishing Good Credit

  1. Don't go it alone. For most of us, the first line of credit we receive is usually a credit card, student loan, or car loan. In most cases, it's best—and often necessary—to seek someone with established credit to act as a co-borrower or cosigner.

  2. Start out small. Establishing good credit takes time. Don't run into trouble by opening too many accounts. Choose a credit card that carries a modest spending limit, offers a fixed interest rate, and charges no annual fees.

  3. Know the traps. Don't open department store credit cards just to get a discount on your purchase. The discount at the store often pales in comparison to the 20-25% interest rate you'll be charged each month on any balance you carry.

  4. Pay on time, every time. Nearly one-third of your credit score is based on your repayment habits. Missing a monthly payment—especially when you've only had credit established for a short period of time—can cause long-term damage to your credit standing and make it difficult to secure a loan. If you plan to attend college, recognize that how you repay your student loans affects your credit scores.

  5. Don't pay down, pay off. Pay off your credit card bills in full each month. If you pay only the minimum, interest charges will build up, thus increasing your overall balance.

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