How to Make or Break Your Financial Future

Credit has been a staple in the financial industry for decades. Nowadays it can easily make or break your future. Some jobs require credit checks when applying to screen ideal applicants from the ones who have made bad financial decisions. However there is a catch-22 in matters involving credit. Rarely can you be extended credit if you don’t already have a year or more worth of credit history. However, with the right knowledge, you can establish credit, and secure your financial future.

Establishing credit can be the biggest obstacle if you don’t have anyone whose credit you can piggyback on for awhile. Having a cosigner with a good credit score when establishing credit is the best head start anyone could ask for. Unfortunately, if your parents or immediate family aren’t doing it, your odds of finding a cosigner are pretty slim. Credit companies consider the cosigner to be a type of safety net in the case that you end up defaulting on your credit, the cosigner will be held responsible for paying. This has proved to work well for companies so it has been a mainstay in the industry and is a solidified stepping stone in establishing credit.

If you don’t happen to have a cosigner, you still have several other options when trying to establish credit, although some of these options do come with a higher cost and a greater risk.

Your best option with the least amount of risk is getting a secured line of credit, also known as a prepaid credit card. With prepaid credit cards, you must first make a deposit matching your line of credit to your credit company. After the initial deposit, you treat the card just as you would any credit card, using it and paying off the balance at the end of the month. The amount you deposited is the companies safety net should you decide to default on your credit balance.

After showing financial responsibility for 12 to 18 months, the company you are working with will let you upgrade to a standard line of credit. Though the APR on this credit card may not be ideal, it’s progress. Try to spend only up to 35% of your credit line each month and always pay your balance off to insure good reports for your credit score.

Establishing good credit can result in lower APRs on the big ticket expenses your future holds, such as a new car or a home.