How to Establish First-Time Credit
When you're new to the world of credit, establishing it for the first time can be frustrating. Most creditors want to see your credit history before they extend you credit. So, what if you're just starting out? How do you obtain that first credit card or car loan? While there's no foolproof solution to obtaining credit for the first time, there is a logical sequence of events you can follow to establish first-time credit.

1. Figure out your monthly budget.
Determine how much discretionary income you have each month by subtracting your monthly expense total from your monthly income total. Track these figures over a period of time, since it's just as easy to forget to include an everyday expense as it is to forget an expense that only comes along once or twice a year.

2. Open savings and checking accounts.
When you are awarded first-time credit, you'll probably be paying the bills with a check, debit card, or online. All of these require you to have a bank account. Be careful to adhere to these simple guidelines:

	Don't overdraw your checking account.
	Don't give others access to your bank account casually – that includes your PIN number(s).
	If you open a joint account, keep in mind that both of you may have equal access to the funds and equal responsibility for maintaining an adequate account balance to cover debits against the account.
	Use your ATM and debit cards wisely. It's very easy to lose track of balances and bank fees when you're a frequent user of either type of card.

3. Focus on improving your credit profile – which means improving how you look to potential creditors.
In addition to the suggestions for completing a budget and opening bank accounts, you'll want to pay attention to the following as you're attempting to establish credit: Establish an employment history. The longer you're with one company, the more stable your employment history appears. Maintain the same address for at least one year – but three to five years is even better. Consider whether there is someone you can ask to co-sign a loan for you. However, co-signing is a big responsibility, so don't be insulted if that person says “no.”

4. Use a sound strategy when applying for your first credit card or loan.
One section of your credit history contains a recap of credit inquiries. Therefore, you don't want to get carried away by applying for too much credit too quickly. There are two kinds of credit inquiries – voluntary (or “hard”) inquiries and involuntary (or “soft”) inquiries. Voluntary inquiries refer to those that stem from a request you made for credit. For example, if you applied for a loan or a credit card and the company you applied with checks your credit, it is considered a voluntary inquiry. Involuntary inquiries are those inquiries made by credit card companies wanting to market their cards to you, without you asking for them. This is also called "prescreening." Too many voluntary inquiries on your credit report can result in a negative credit picture. Therefore, you want to be selective about where and when you apply for credit. Following are some ideas that will help you formulate a sound credit-seeking strategy:

	Make sure the creditor you start out with is a reputable company and that it sends reports to at least one of the major credit reporting agencies – TransUnion, Equifax, or Experian.
	Make an informed decision about which credit card or loan you apply for.
	Shop around for the best interest rate, the lowest fee structure, and the most reasonable “grace period” (i.e., the time before interest is attached to a purchase made on credit).

If you're turned down a couple times, consider looking into a secured credit card or a secured loan, just to get the opportunity to establish a payment history. Secured credit is called such because you deposit the money up front, usually with a bank, and then you begin “borrowing” against that amount. If you neglect to pay back what you borrow, the creditor simply takes it out of the money you already have on deposit.

5. Use a sound strategy when applying for your first credit card or loan.
Once you've established your first credit card or loan, be extremely diligent about maintaining a good record with the creditor, thus ensuring a good credit history: Begin with a low credit limit (you probably won't have a choice). If you pay your bills regularly, eventually your credit limit will be raised. Pay your bills on time every month and try to pay more than the minimum payment each time. Once you begin to establish credit, be selective about applying for more. Remember to consult your budget before incurring any more debt. Make sure you have the ability to pay off any debt you incur.