How to Establish Credit

Whether you are new to credit or are trying to "clean up" past mistakes to reestablish a favorable record, you may encounter a frustrating paradox: you must have and use credit to create a credit history, yet many financial institutions are reluctant to extend credit to someone without an established record. But don't despair - there are several good remedies for both situations.

• Secured credit card. You are granted a credit line based on a percentage of a cash deposit you make to your financial institution. Because deposits are usually low, so too will be your credit limit. Application and annual fees for secured cards are often higher then those associated with unsecured credit cards.
• Local retailer's credit card. Their criteria is often less rigorous then larger credit issuers. Be sure they subscribe to the major credit reporting agencies though - if not, you won't be establishing a credit history.
• Have someone with a positive credit record cosign an account for you. This requires a great deal of trust on the part of the cosigner - if you fail to pay, he or she is responsible. You could end up jeopardizing a relationship as well as a credit record.
• Finally, if you have damaged credit, you'll need to rectify the past as you're building your future. Pay old debts and correct errors as soon as possible.
• Once you have a credit line, establish a good history by using it responsibly. Keep balances low, always pay on time, don't pursue unnecessary credit, and stick with a few good credit instruments of various types.

Establishing a positive credit record, however, requires dedication and patience.

Your credit union wants to help you master your money. We've partnered with BALANCE, a financial education and counseling service that can help you get your finances in order, pay down your debt, and reach your goals – all at no charge to you. Call 888-456-2227 or log on to www.balancepro.net for more information.