Credit

The term credit can be used in many different contexts. The most common of these is its use as a financial term, such as in a credit card, where it refers to the granting of a loan and the creation of debt. Any movement of financial capital is usually quite dependent on credit, which in turn is dependent on the reputation or credit-worthiness of the entity or individual who takes responsibility for the funds.

Your credit will follow you through your entire life. It is tied to so many things, from loans to your insurance premiums.

So it is important to start out on the right foot. But you may find that you are having trouble even getting started. It is a endless loop -- you need credit to establish a credit history, but you can't get credit without a credit history. This seems like quite the challenge.

You should start with opening a savings and checking account. This is pretty much essential. You simply don't overdraw on your account. Bank accounts don't make your credit file, but they do show that you have some money and you handle it responsibly.

You should have your utilities and apartment in your name and Social Security number. This allows you to establish a regular payment history. When recurring bills are paid in a timely manner it shows you know how to make payments. This makes you less of a risk. Keep copies of your bills and your canceled checks. You are often asked for these when you apply for a mortgage. You can even have your landlord, utilities or insurance agent write referrals on your behalf saying that you pay your bills on time.

Start your life with credit by applying for a charge card. Start with a department store or gas credit card. These cards often have low credit lines and are easier to obtain. You may pay a higher interest rate, but if you pay the balance each month, you won't be charged interest. You have to pay the balance on time every month. And try not to carry a balance. If you can't pay it all, don't charge on it till it is all paid off. This is good practice now and later.

You can also obtain a secured credit card. With a secured card, you deposit a certain amount into a special account, and you get a credit card with that credit limit on it. If you don't make the payment, they take it from the account. You are basically borrowing against your own money and paying interest to do so. It is important to pay the balance in full each month so that you don't pay the interest. The idea isn't to buy things you can't afford, but to build your credit rating. And again, you have to pay all your bills on time each month.

Make sure that you are smart about your credit. Use it responsibly and make timely payments. If you mail your payments, put them in the mail at least ten days before they are due.

Check your credit report at least once a year to make sure that it is correct. If you find a mistake, you need to take immediate steps to correct it. Part of having credit is learning how to use it wisely. While mistakes happen, they will cost you dearly. Credit is very important. If you use it wisely, you can improve your life. If you use it unwisely, you will find that life isn't quite so easy.