11/18/11

Building up your credit is important



Because of the recent financial crisis, banks are very careful about who they lend money to, and this includes who they offer credit to (which is like a potential loan).  This means that acquiring credit in this way is not as easy as it used to be.  One of the best things you can do to start building up your credit (to get that credit card) is to show that you are responsible.

However, most 18 year olds can’t get unsecured credit cards anymore.  A good alternative to an unsecured credit card would be to get an unsecured credit card until you show that you can be responsible.  Secured cards require you to put down an initial amount of money (maybe $500), and then you can charge against this deposit.  Everything about a secured credit card functions identically to an unsecured credit card except the bank has some collateral in case you can't make payments.  An unsecured credit card differs from a debit card in that money is not deducted from the account when you use the card.  You still have to make payments, but if you have a late payment or default, the bank keeps your deposit (the $500).  For an example of a secured credit card you can check out Green Dot credit card on twitter.

It is necessary to be careful when applying for credit cards both secured and unsecured.  Because of the rise of the internet, the scammers and con artists have found new ways to steal money from us.  Check out this post released by the US government on secured credit card scams just to make sure your bases are covered.  So common scams include having 900 numbers that charge you for the phone call regardless of whether or not you get the card.  Other scams include keeping your deposit without issuing a card at all.

While I do believe that having a credit card can be a positive thing, it is imperative that you use it responsibly.  I don’t think that a credit card is for everyone, but if you do find yourself in that situation where you need to borrow some money and you KNOW that you can pay it back soon, then having a credit card available is a good thing.  Also, building up your credit now will help you get approved for car loans and mortgages in the future.  Having good credit will also help you get lower rates when you do apply for these loans.

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