Credit for the first time borrower

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Farm Forum

One day your child will grow up to be a self-supporting adult with a variety of personal finance needs. In all likelihood, access to credit will be one of them. A person without a credit history, who has never had credit, may have problems getting that first loan or credit card. Fortunately, there are options available.

• Open a checking and savings account at a local financial institution. If you handle the checking account responsibly and prove to be a valued account holder, the institution may grant you a small loan or offer you a credit card.

• Apply for a retailer’s charge card. This can be the first step toward applying for a major credit card, once you have shown an excellent credit payment record.

• Buy the appliances or home furnishings you need using the credit plan of a local retailer.

• Apply for a secured credit card. Designed for people who have no previous credit history, this card requires a minimum deposit that usually equals the amount of credit available on the credit card.

• Apply for an auto loan with an automobile finance company. Dealers offer special programs tailored to first-time borrowers.

• Obtain a student loan if college-bound. Remember, a student loan is a real loan and getting behind in payments can hurt your credibility.

• Ask a close friend or relative to cosign for a loan. In doing this, the cosigner is guaranteeing that payments will be made on time and in full. If the credit applicant does not repay the loan, the cosigner will be legally responsible for doing so.

Remember, once credit is granted, manage it responsibly. This is the beginning of your credit record, which will form the basis for future credit.

Parents, before you agree to be a cosigner, you need to be aware of the obligation you’ll be taking on. You’re agreeing to pay the loan if the borrower defaults.

Reach Karen Slunecka at 605-626-2870 or karen.slunecka@sdstate.edu.