New Graduate? Start Establishing Credit Now!

If you just finished school, you may not have much of a credit history. It’s tough to embark on your career without the ability to buy furniture or a car – two major purchases for which most people need to buy with credit. Here are three quick ways to establish credit:

Get an income. To establish credit, you need a regular income. Most people have income from a job, but you can receive a regular income from a trust fund, alimony, government assistance or even an allowance from your parents. All the creditors care about is that you have continuous cash flow.

Ask for credit from a lender who reports to a credit bureau. If your lender does not report repayment information to a recognized credit-reporting agency, your attempts to establish credit will be wasted. Lenders are not required to report, so be sure to ask about their policy before you apply for credit. Only apply for credit with lenders who report.

Apply for a retail store charge card. Most national-chain retail stores issue credit cards, but can only be used at their store. Many major retailers will offer charge cards to first-time borrowers and will give you a discount on merchandise when you apply. The interest rates are often high and credit limits low for first-time borrowers, but if you pay your bills promptly, it will help you establish a good credit rating. It also gives you the opportunity to obtain more credit. Stores often sell your name and address to other retailers so they can invite you to apply for their credit cards.

It is very important that once you start establishing credit that you pay your bills on time, every time. In fact, it is advisable for any new graduate not to attempt to establish credit until they have a savings account with a minimum week or two of salary in it. That way you will have a reserve that will help you if you have unexpected vehicle repair bills or medical expenses