How do I get credit?

Industrial Credit Union and other lenders extend credit by loaning you money at an agreed-upon amount and payment term (the length of time you have to repay the loan). When you enter into this agreement to borrow money, you begin to establish a credit history. Your credit history includes details about all of your credit accounts, including how much credit you have available, how much you are using, and how often you make payments on-time. It can also contain public records such as bankruptcies, judgements and liens against you.

So how do I get credit if I don’t have any?

One of the best ways you can start establishing credit is to apply for a secured loan. A secured loan means that some asset is used as collateral to protect the lender in the event that you do not repay the loan.

In the case of a secured credit card or line of credit, you make a cash deposit that becomes your line of credit. For example, if you deposit $500, you can charge up to $500. As you make payments over time, this information will be reported to the credit reporting agencies and your score will start to build.

Why not just apply for a bunch of credit card offers online?

You need to be careful when applying for any type of loan that you can trust the company you’re entering into an agreement with. Many credit card companies will bury important information in the fine print and charge astronomical interest rates – sometimes up to or over 30%! Make sure you understand exactly what you’re agreeing to and how it will help – or hurt – your financial goals.

You also need to be careful not to overdo it when trying to establish credit. Running out and opening 15 different department store credit cards won’t give your credit the boost you’re looking for. When it comes to credit, time is on your side – make your payments on time, every single month, and you’ll start seeing positive increases in your score.

What should I do next?

A great place to start for trustworthy financial advice is your credit union. Credit unions are not-for-profit institutions that typically have lower rates than banks and vow to put people over profits. At Industrial Credit Union, we offer free financial counseling and can help you find an option that works for your unique situation.