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Student Banking

Managing Your Credit


Tips to Help You Establish a Good Credit History

It's important to build a good credit history as soon as possible. By showing that you can handle credit responsibly, you'll be able to prove to lenders that you have the financial maturity for larger borrowing needs, like a car loan or mortgage. This can also help you save money as, in many cases, a good credit rating allows you to negotiate a lower interest rate.

1. Start small

If you have never used credit, consider applying for a credit card with a minimum limit or a small personal loan, with a parent or other adult acting as co-signer if necessary. (Note: a co-signer agrees to assume responsibility for repayment in the event of your default.) Then, make payments on time and in full to show a pattern of responsible credit use.

Once you have successfully paid off the initial loan, you will likely qualify for more credit on your own merits.

2. Be responsible

Check your monthly statements as soon as you get them and make payments on time. Avoid skipping payments or being late.

First-time credit card holders sometimes make the mistake of "holding off" a payment until they can pay the entire balance. This results in higher interest charges and a negative credit history. If you can't pay your entire balance each month, you should consistently make your minimum monthly payments by the due date. But if you are unable to do so, don't just let matters go: contact your lender right away to discuss your options with them.

3. Make all bills a priority

Whether it is a student loan, credit card payment or telephone bill, they all count toward your credit history. Details of all credit transactions with major financial institutions, utilities and retail organizations are kept on file with the central credit bureaus and do affect your credit rating.

Next: Credit Bureaus 

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Not All Credit Is Created Equal
Six Ways to Help You Pay Less Interest
Tips to Help You Establish a Good Credit History
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10/15/2007 13:22:21