How to Establish Credit and Keep Your Credit Score High

I remember being a teenager who just turned 18 and knew that I needed credit if I was going to be able to do anything in life. I was going to need to have my own credit to buy a car on my own, and eventually be able to buy a home. The only problem was that to get credit, you had to have credit.  Most credit card companies will not give you credit if you didn’t already have a history of using credit.

So this is what I did:

I went to the bank and asked them for a secured credit card. This card is basically a bank account that holds a set amount ($300 in my case) that you pay them. Then when you charge something on it, if you fail to make a payment, they will take the money that you have set up in the account. If they end up doing that, your credit score will go down and no one will give you credit.

Your objective is to establish credit for yourself and raise your credit score so you will start receiving credit card applications in the mail. To do this you must buy something and let the balance on your secured card roll over for at least a month. I suggest that you buy something that you have wanted that will cost you about $100. The first month pay $25. The second pay another $25. The third pay another $25. Finally on the fourth month pay the remaining balance which will be above $25 because of the interest you have accrued over the last 3 months. By this time you should show yourself in good standing with the credit card companies and they will start sending you pre-approved applications. If this is not the case, buy something else that you need or want and continue to pay it off systematically. Sometimes it can take six months to a year to start receiving the applications.

When you do start receiving applications, make sure you pick one that does not charge an annual fee, and gives you something back for making purchases. For me, I like to get money back, or points towards things that I like to do. I even have a card that earns money towards college.

When you get your first unsecured card, go back to the bank and cancel the secured card. They will give you the balance from the account you set up to secure the card.

Most people only need one credit card.  The cards that you get for department stores usually have a crazy interest rate.  The only time I would sign up for one of those is if I was buying furniture and they offered to defer the interest for more than a year.  If you do that, you need to make sure that you pay the balance before they start to tack on that interest. 

What I would suggest that you do with your new unsecured card is to use it for gas for your car. Then pay it off every month. Do not let a balance grow on that card.  If you do, do not let it stay there more than a couple of months. If you are going to use the card as money you don’t have, do not buy the item that you are thinking of putting on the card. This is how people get themselves into trouble with debt. Credit cards should only be an alternative to carrying cash. You should be able to pay off the card at any time. At least that is the way I look at it.

How to Eliminate Your Debt Quickly

More and more people in the US of A are having problems with their debt. I know. I was one of them. To tell the truth, I am again and I am working on getting myself and my family out of debt again.

When I was in college, I was working 35 hours per week and taking 12 to 16 credit hours at school. I was living with my parents and I still had very little money. The reason? I spent it all on stupid stuff. I fed all the collections that I started with more and more stuff that I really didn’t need. When I graduated college, I put a $3,000 down payment for a new car on my credit card. That was a really big mistake. It took me almost 5 years to pay off that $3,000 and it cost me so much more than what I originally charged.

A few years ago I was fed up with all the debt that had piled up on me. It was close to $5,000 plus my car loan. Now I am lucky that I started to read up on how to get myself out of debt when I was only lightly in debt. I know there are people out there who are hundreds of thousands of dollars in debt. That is terrifying to me.

In my reading, I found that I should be living below 80% of my total income. For some reason I had not really realized that in order to get myself out of debt, I had to actually be able to pay for it. From that point I started to weed myself off of buying stupid things. Most of my collections got moved to the sidelines. I even started to liquidate my collections. My baseball collection found its way onto eBay, as well as part of my autograph collection and some of my coin collection.

I was given regular raises at my job and my income was slowly growing above what it was costing for me to live. I started to see a change in the balance on my credit cards. Instead of watching my credit card debt slowly grow a little each month, I was starting to pay it off little by little. I soon had all my credit cards paid off and took big chunk out of my car loan.

The following is a Step by Step Guide for how I was able to get myself out of debt.

1. Eliminate your stupid spending.
   • Don’t buy Name brands if you don’t have to
   • Don’t allow yourself to make spontaneous purchases. Always Sleep on it.
   • Don’t use your credit card.
2. Credit is Good, Credit Cards are EVIL
3. How Deep Does Your Debt Pit Go?
   • Gather all of your monthly bills.
   • Find How Much you Owe Per Month
   • Cry a bit
4. What Can You Afford to Pay
   • Find your Pay Stub(s)
   • Subtract your Total Debt per Month from Your Total Income
   • Cry a bit more
5. Types of Debt
   • Good Debt
   • Bad Debt
   • Really Atrocious Debt
6. Quickest Way to Pay off your Debt.
7. Proper Perspective about Money
8. More on Thrifty Living