If you're like me, a teenager or young adult, just getting started in the big wide world, getting credit can be tough. Most creditors want to see a solid credit history before they give you a loan. They seem to be as clueless as I am as to how to get a credit history. After all, how do you get a credit history when you have to have one to get credit? Duh!
As frustrating as it can be for a young person, there are a few ways to get some credit history, to at least give you a little something to show the bank.
Co-signer
The easiest way to get started with credit is to get a parent, grandparent, etc. to co-sign a loan for you, usually a car loan. However, for some of us, that is not an option for one reason or another. Another option you can consider is a co-signed credit card. Just be sure that you pay your bills on time, or you'll just get yourself a bad credit history and be in worse shape than when you started!
Secured Credit Card
You can also get a secured credit card. You would make a deposit of perhaps $500 to the issuing bank. They would then issue you a credit card with a $500 limit. That protects them, and will give you a credit history. A word of warning - the leading bank that issues secured credit cards has a very bad record with the Better Business Bureau, so check out the bank first!
Secured Loan
You can also get a small secured loan. You deposit $1,000 with the bank as collateral, and they loan you $1,000. This is really pointless, except it does give you a credit history.
Lastly, once you get some credit history, keep in mind that you may be able to get a fuel card or department store card before you can get a credit card. Check and see if the fuel / dept store card will report to the credit agencies and help improve your credit history.
One final tip - if you're buying a car and need a car loan, a good salesman will help you get a loan. That's actually how I got mine - along with a large down payment and a co-signature.
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