Tips For Establishing Credit For The First Time - Refresh Financial

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Tips For Establishing Credit For The First Time

 Tips For Establishing Credit For The First Time

Establishing and building credit for the first time can be difficult. How can you be trusted with credit products, if you don't have any credit history? How are you supposed to get started? Luckily, there are some easy ways around this dilemma. Here are some great tips for establishing credit for the first time!

1. Secured Card

- This is one of the most common methods for establishing a credit score. Unlike a traditional credit card, a secured card means you will have to put some money down first, as collateral, to make it less risky for the lender. A secured card can be used just like a traditional credit card. Your repayment habits will be reported to the credit bureau, and just like that, your credit journey begins! If you’re interested in this sort of credit card, click here.

2. Secured Savings Loan

- This is arguably the most effective method to establishing and building a healthy credit score. It mainly differs from a traditional loan in this way: instead of receiving cash at the beginning, you'll receive the payout at the end of the term. In many ways, it's easier than a secured card because you don't have to come up with any security deposit and there are no upfront fees. Every payment you make throughout your term is reported to the credit bureau, which will skyrocket your score! You can find out more about secured savings loans here.

3. Co-signer

- Another option towards building a credit history from scratch is to have a co-signer. This reduces the risk for the lender because if you fail to pay the debt, the co-signer will then be on the hook for what is owed. Be careful with this method, as co-signing for credit can easily put stress on the relationship between the borrower and co-signer. Be sure to enter into this agreement only if you are willing and able to pay everything back you owe.

Once you've chosen one of the listed strategies and you're actively borrowing money, you'll need to make sure you're doing so responsibly. Here are a few pointers for your first form of credit.

1. Never Miss A Payment

- Do whatever it takes to remind yourself when bills are due! Smartphone reminder apps work great to ensure you never miss a payment. Missing a payment will reflect negatively on your credit report and could haunt you for years, so make this a priority!

2. Late Payments

- Same deal as a missed payment. If it shows up on your credit report, it will drag down your credit score.

3. Pay More Than The Minimum Payment

- If you can manage, pay off your entire credit card bill every month. This practice will build your credit score, and prevent you from paying extra on interest. If you’re looking to purchase a vehicle or a home in the future, this practice will make sure your credit report does not get in the way of that.

If you take credit seriously and practice the advice mentioned above, there's no reason why you won't succeed in building a strong credit score. Down the road, you'll enjoy the many perks that come with it, like your choice of rewards cards, and access to the lowest interest rates!

What are some tips you would give to Canadians who are just starting out with credit? Let us know in the comments!

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