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Starting Out on the Right Foot: Establishing Your First Line of Credit

If you are “of age” to be considspiering applying for a credit card, you likely already know the benefits of having a line of credit available to you when you don’t have cash in your pocket. You probably also know how important it is to establish a strong credit history from the outset because, going forward, your credit score can be your best friend or your worst enemy.

If you have good credit, you can apply for loans at the best interest rates. This means when it comes time to apply for a mortgage, a car loan, or even another credit card, you will be looked upon favorably by the lender. In contrast, with poor credit, you may not be able to get a loan at all. And, if you can, you will be paying outrageously high interest rates.

Another thing that many people don’t consider – but they should in New Jersey! – is that auto insurance companies look up the credit of prospective clients. Then, they base your premium on your credit. It stands to reason that if you aren’t responsible with your credit, perhaps you may not be a good driver, as well. Ninety percent of insurance companies in the US say they use credit information when determining premium rates.

So, what can you do to start out well and stay on the straight and narrow with your credit? Get a credit card – even if it’s a secured line of credit – and pay your bills on time. A secured credit card is one that allows you to put money on account and draw against it. The credit card company really isn’t taking a risk on you because it’s your money and you can’t charge more than you have on account. However, it does allow them to see you are being responsible with your credit card.

Important thing to note: you have to use your credit lines in order to establish a good credit history. Charge small – never more than you can afford to pay back – and pay your bills on time every month. Slowly but surely you will have access to more credit. (But don’t say “yes” to every card that comes in the mail!)

If you are having trouble establishing credit after bankruptcy or have gotten in over your head in debt, contact a knowledgeable lawyer who can review your situation and come to your aid. Joel R. Spivack, Esq. has been assisting clients in Cherry Hill NJ with their financial challenges for over 25 years. Call him today for a free consultation about your personal situation.