° When lenders are looking at your credit score, they may consider the score from just one credit bureau, or they may look at all three. FINDING OUT YOUR SCORE: ° The Fair Credit Reporting Act (FCRA) says that Americans are entitled to receive one free credit report each year from each of the three credit bureaus. ° ° This way, you can check your record and correct any errors. °
° Your credit record doesn't tell you your credit score. You can get your score for an extra fee. ° You can get free credit reports at annualcreditreport.com, a site that is run by the three credit bureaus. ESTABLISHING CREDIT: ° If you don't have a credit history or a credit score, it's a good idea to start establishing a credit history. ° ° Most people will want to use credit someday to make a major purchase such as a car or house, or to get a loan for a project or for starting up a business. A personal credit card can also be useful in emergencies. ° A good credit history and credit score can help you get credit at a low interest rate.
STEP 1: OPEN A BANK ACCOUNT ° Opening a bank account is a good first step toward establishing credit. You can open a bank account even if you are less than 18 years old. ° ° Your bank account information doesn't get reported to the credit bureaus, but it shows lenders that you are able to manage money. ° ° Creating a relationship with a bank is helpful, because the bank is more likely to give you a credit card if you have a bank account there and use it appropriately. ° ° If you open a bank account and misuse it by spending more money than you have and creating overdraft fees, the bank is less likely to trust you with a credit card.
° If you use your bank account wisely and appropriately, the bank is more likely to give you a credit card. STEP 2: GET A CREDIT CARD ° A credit card is a card that looks similar to a debit card, but it is connected to a credit account, instead of a bank account. ° ° Credit cards are a form of electronic funds transfer, because the lender transfers money electronically to let you pay for things. You then have to pay the lender back later. ° ° If you are at least 18 years old and are a college student or have savings or a steady income, you may be able to get a standard credit card, such as Visa®, MasterCard®, or American Express®.
° ° If you have a bank account, you may be able to get the card through the bank. ° ° When you have a credit card, use it carefully for purchases that you will be able to pay off right away. Pay off the balance due in full each month. ° ° You do not need to have money owed on your credit card in order to improve your credit score. You just need to use the card to show that it's active. ° ° Paying off the balance in full each month will avoid interest charges, and it will show that you are able to manage your debt well.
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