Establishing Credit 

Every adult needs to be aware of the credit record and credit score known as their FICO score. Couples need to be aware of both their joint credit and their individual credit history and scores.

The first step to establishing credit is finding out if you already have a credit report and making sure that report represents an accurate credit history for you.  See my post on Requesting Your Credit Report for more information.   If you are a young adult, single, newly single for any reason you may want to check you credit and make sure you are continuing to establish good credit going forward.

Credit is established by financial institutions such as banks, credit unions, credit cards, mortgage companies and more reporting to the major credit reporting agencies.  These agencies typically report monthly and they report both the highest dollar amount of credit you have used as well as the payment history on your accounts.

So, to establish credit you need to use some form of credit, such as a credit card, auto loan, mortgage, or other form of borrowing money from a reporting financial institution.

To establish credit you will need a minimum of these three things:

1.  Personal checking account in your name only.

     If you use a bank or credit union for your mortgage or other account with your spouse, 

     you can go to the same bank where you have an account and open a checking account

     there where you already have some history and are an establish customer.

     Before opening an account, make sure you check the minimum balance requirements to 

     avoid having fees on the account.  If the bank minimums are too high for you, check a local

     credit union for free checking or the lowest fees.

2.  Personal savings account in your name only.

     A savings account is almost always opened with a checking account at your bank or 

     credit union.  The credit union will require a savings account with a minimum balance

3.  A credit card in your name only (not joint with a spouse or parent)

     Again, if you have an account at a bank or credit union, you may be able to get a credit card 

     with at least a small credit line due to your existing customer status.

     Before opening a credit card account, be sure to look for a credit card that does not have an

     annual fee.  You might also try to find a card that has cash back bonuses.

     Be sure to manage this credit card well and pay off the balance in full every month to avoid

     interest charges.  You are not trying to build up debt, you are trying to show a history of 

     paying your bills on time and in full.

Cautions:

a.  If you are married, see additional posts on joint finances regarding credit.

b.  This post is not intended to encourage borrowing money or encouraging you to maintain a debt balance on any account.  See other posts regarding the wisdom of being debt free and how you can be debt free and still have a good credit history.

Related Posts:

Benefits of a Credit Union
Requesting Free Credit Reports

How are some other ways you have found that you can safely establish credit or improve your credit record?