When you’re trying to build your credit history from scratch, it can feel like everyone only has one thing to tell you — get a credit card. But try as you might, you just can’t seem to find a credit card that isn’t trying to bend you over a barrel — oh my! What is a young person trying to build credit supposed to do, just pretend like they don’t need credit? Even if you’re comfortable with living without credit for the short term, you’re going to probably want things later down the road that do indeed require credit. They do indeed require that you focus on the road ahead. They do indeed require that you stay focused on the things that really matter. If you aren’t really ready to do those things then you might want to be a cash customer for a while until you get the hang of it. Hey, it gives you plenty of time to read all of our killer personal finance articles, right? Right!
Moving back to the subject at hand, have you ever thought about your local credit union? Sure, they don’t advertise as much as the other banks do, but that doesn’t mean that they aren’t important. That doesn’t mean that they aren’t there to help you. In fact, it’s scenarios like the one you’re dealing with right now that are the key reason why credit unions exist in the first place. They’re designed to give everyone a start in life — not just the ones that the big banks feel are going to spend the most money.
In order to get started with this plan though, you’re going to need to build the relationship slowly. Start with a checking account and a savings account. That’s a good way to let the credit union know that you’re trying to stick with them for a while. Over time, you can pick up other things like CDs and even money market accounts. You can rest assured that your deposits are still safe even though it’s a credit union and not a traditional bank.
Once you’ve been with the credit union for a while, you can ask one of the representatives there about credit products. Mention up front that you don’t have a credit history yet, and you’re trying to figure out the best way to get things rolling. Believe it or not, the credit union reps like when you’re willing to take risks and push forward. It’s better than thinking that you really don’t have any recourse to get what you want. Being passive about your credit is not a smart idea at all.
If you have sufficient savings, you might be able to go ahead and get a signature loan. This is a loan that sounds exactly what the name implies. You sign off, and you can use your savings account as the collateral. Of course, the credit union is going to make a little bit of interest off the purchase, but otherwise you have some leeway in the type of loan you get. Start with their smallest one — even if the rep is willing to give you a higher account. You want to make sure that you are building trust with each and every step of the way, and you cannot do that if you are only focusing on the biggest loan amount possible. What if you can’t pay all of it back on time? This will mess up your credit before you’ve even had a chance to get things done, and who wants to really deal with that?
So the best thing that you can do for yourself is to go ahead and make sure that you take things slow. It cannot be stressed enough that you will want to make sure that all of your payments for the amount you were loaned are paid back in a timely fashion. If you can pull it off, it might not be a bad idea to go ahead and pay these debts early on.
Don’t just settle for one loan product — see what else you can get – like personal loan!