Getting and using credit is a part of living in the modern world. People often say that it's best to live on cash and never owe anyone anything, which is good advice, but it's almost impossible to live that way today. Most American adults will need credit at some point in their lives, and your local bank is one of the best places to get it.
When young adults are just starting out, it can be hard to get credit, and when they do, it can be hard for them to pay it back. People's early credit mistakes can affect them for a long time, sometimes for as long as seven to ten years, depending on the type of problem. This doesn't have to happen.
Your local bank is a good place to start if you want to get credit. Younger people can often borrow small amounts of money from their local bank. Banks know that giving out smaller loans at first can help young adults who are working learn more about credit and how to pay it back. Small cash loans, usually between $500 and $1,000, are a great way for young adults to build a good credit history that will help them when they get older and need more credit.
Young adults can start off on the right foot with their credit reports if they borrow money from a local bank and pay it back on time. Many young adults, especially college students, start their credit lives by getting a credit card and maxing it out. This can lead to some trouble. The first problem is that it can change how much debt these people have compared to how much money they make. Most college students who work don't make a lot of money, and if that low number is used to calculate the debt-to-income ratio, it can hurt the student's credit. Also, if credit card payments aren't made on time, which happens a lot, the student can end up with a lot of late payment marks on his or her credit report.
The same is true of a loan from a bank. When it comes to paying back a bank loan, young adults tend to be more careful than older people. If parents talk to their kids about how important it is to make payments on time, most young adults will be more careful with their payments, which will help them a lot with their credit in the future.
You can also use your local bank to help you build credit by applying for a secured credit card, if they offer them. For these credit cards, you have to put money into an account, and the card's credit limit can't be more than what's in the account. This is a good way to teach young adults how to use credit cards, and it can also help them improve their credit reports.
Once young adults have built up some credit and made payments, they should be told to check their credit reports. Given how important credit reports and credit scores are in everyday life, it is surprising how little students learn about them in school.
