Frequently Asked Questions

Credit is the foundation on which you build your financial life, allowing you to borrow money or access goods and services that you need right now based on the promise you’ll pay it back later. Building and maintaining good credit helps you qualify to borrow money at the best available terms for increasingly larger purchases like a home or vehicle  when you need them.

While the importance of credit on your finances is clear, it also can impact other aspects of your life like your ability to rent an apartment or home, secure insurance or even find a job.wer to this item.

This is credit you can use repeatedly as you pay it off, like a credit card. You can make purchases so long as you stay under the credit limit, which can change over time. You must make a minimum payment every month, but you can pay any portion of your outstanding balance up to the full amount

Service credit includes payments and bills from utility companies and service providers like cable, mobile phones and gym memberships. They provide you with a service with the understanding that you will pay for that service after the fact.

These loans are for a specific sum of money that you repay over a set amount of time such as mortgages, student loans and auto loans.

Relatively rare nowadays, charge cards are similar to credit cards, but usually used exclusively at a particular establishment like a store or restaurant. They don’t allow you to carry a balance, meaning you must pay all charges in full every month.

To build good credit, you need to establish a credit history of regular credit use and borrowing along with consistent, on-time payments. There are a few ways to begin building your credit history.

• Secured Credit Card:
  A secured credit card is a credit card that allows you to begin building credit while minimizing the risk of overspending. You pay your lender an initial cash deposit that serves as the credit limit and use the card to make purchases like a regular credit card. Your activity is reported to the major credit bureaus, contributing to your credit history.
• Become an Authorized User:
  By becoming an authorized user on someone else’s (usually a family member’s) credit card, you get to piggyback off that individual’s existing credit history to start building yours. Depending on what limits the primary cardholder puts in place, you’ll be able to make purchases with the card, which will impact both yours and the primary cardholder’s credit histories.
• Open a Retail Credit Card:
  Although not always recommended, applying for a retail credit card (think Best Buy or Kohl’s, for example) can be a good step to build your initial credit history. You’ll want to charge a small amount at a time and pay it off in full each month so you won’t pay extra in finance charges.

After you start using and building credit, you’ll start to receive pre-approved offers for new cards and potentially other types of loans. While building credit is important, opening up as many credit cards as you can is not. It’s a surefire way to get you into trouble with debt. You will want to establish some limitations on the types of credit you use, keeping in mind what you can realistically repay every month without stretching your finances thin.