Manage Your Money, Lesson 4: How Much Credit Can You Afford?, How Do You Establish Credit?

Ohio State University Extension/Research

Manage Your Money

Lesson 4: How Much Credit Can You Afford?

MYM-3-03

How Do You Establish Credit?

Remember, getting credit is a privilege and it can take time to build a positive financial history to qualify you for the credit you want. Here are several ways you can begin to build a good credit history:

Open a checking account or a savings account or both. These do not begin your credit file but may serve as evidence that you have money and know how to manage it.

Apply for credit at a local store. Ask if they report to a credit bureau. If they do and you pay your bills on time, you are building a good credit history.

Obtain a secured credit card. You can do this by opening an account at a bank, savings and loan, or a credit union, and depositing an amount of money that will secure your line of credit. Your credit line will be a percentage of the amount you keep on deposit.

Ask someone with a good credit history to co-sign a loan for you. The co-signer promises to pay your debts if you do not. Paying the debt promptly will help you build a positive credit history and enable you to establish an account on your own later. Both you and the co-signer should understand the importance of making these payments on time. If you fail to do so, you not only jeopardize your new credit record, you also cause negative information to be added to the co-signer’s credit file. The co-signer is, in the end, responsible for paying the debt you incurred. (If you fail to live up to your obligation, you may also ruin the relationship you have with the co-signer.)

[back]

Written by Ella Mae Bard, Extension Agent in Family & Consumer Sciences, Knox Co., Carolyn McKinney, Family Resource Management Specialist, Consumer & Textile Sciences Dept., Nancy Hudson, Northeast District Family & Consumer Sciences Specialist, and Diane Johnson, Extension Agent in Family & Consumer Sciences, Darke Co., Ohio State University Extension. Portions adapted from "Managing Your Money," prepared (1994, 1996) by Eleanor Ames, former OSU Extension Agent (Madison Co.) in Family & Consumer Sciences.

For more information about family life issues, visit http://families.osu.edu

Manage Your Money is a six-part self-study course. The lessons include:

Getting Started
Where Does Your Money Go?
Stop Spending Leaks

How Much Credit Can You Afford?
Develop Your Budget
Your Net Worth and Financial Records

Appreciation is expressed to Marjorie McCullough, Office Associate, Consumer and Textile Sciences Department, who worked with several drafts of these materials.

This material is intended only for educational purposes. Mention of a proprietary product, trademark or commercial firm in text or figures does not constitute endorsement by Ohio State University Extension and does not imply approval to the exclusion of other products, firms, or organizations. For specific, consult your financial or legal adviser.

All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.
Keith L. Smith, Associate Vice President for Ag. Adm. and Director, OSU Extension.
TDD No. 800-589-8292 (Ohio only) or 614-292-1868