The BIGG Successs Show
I Am a Recent College Graduate. How Do I Establish Credit?
3 tips get the credit you deserve. Read our show summary at biggsuccess.com.
Welcome to The Big Success Show. Today, we'll discuss how to establish credit for the first time. The Big Success Show with George and Mary Lynn. Leah just graduated from college and she's applied for several credit cards and been turned down. What? She says, yeah, can you believe that? I can't. Just kidding. Does this happen more and more these days, right? Because they say they're turning her down because she doesn't have any credit history and she freely acknowledges that she hasn't ever had a credit card or, for that matter, borrowed money before in any form. So she wants to know her big challenge to us is how can she establish credit? This is a great question. And what we're going to do today, Leah, is give you three tips to get started. So let's dive in. The first, get a bank loan. Now, I think Leah's probably wondering, what, if these guys flipped out, right? Because I'm asking them how to get credit. And they say, get a bank loan. Hold tight just for a minute, Leah. All right, this could cost you a little, but it's going to be worth it so you can have access to money when you need it. Now, George, how do you make this happen? Well, it's fairly simple, actually. Deposit $1,000 or so into an account. For example, a certificate of deposit, commonly known as a CD, right? Deposit that for a fixed period of time, let's say three months. Then ask that same bank for $1,000 loan or whatever amount you put into it to be paid back at the end of three months. Now, they may require you to pay the interest monthly or they may just say, pay it at the end of the three months. But see, here's the thing. Your loan is 100% secured by the CD, so the bank has no risk. Only the risk that you're not going to pay your interest, but why would you not do that? You're going to earn interest on the CD, not as much as you're going to pay on the loan, so you will be out of pocket just a little bit of money. But you are establishing the credit that you need and want. Because at the end of the three months, you'll pay back to $1,000. Now, next step, up the ante. Do the same thing all over again with, let's say, $2,000, or whatever you're comfortable with. Then again, each time increasing the amount. Over the course of, let's say, a year, you may do this four times. And what you want to do is keep the amount relatively small, because you don't want to pay too much an interest rate, right? But what you are doing is establishing that you can pay back a loan of $1,000, $2,000, or whatever the highest amount is that you can borrow. Just make sure that you make every payment on time. And when I was young Mary Lynn, which it's surprising that I remember this. Years and years ago. But I borrowed, I think at that time, is $2,500 from a banker that I knew. And I didn't really need to borrow it. I actually had the cash. But I knew I needed to create a credit history, right? So I used the money to buy something. And then I paid off the loan in, I think, six months. Repeated that process, and that's how I got started. And now you've got more credit cards than you can count. It's scary. Coming up, two more tips that will help you establish credit, Leah. And they might surprise you. Today, we're answering a big challenge from Leah, who wants to know how to establish credit. And so far, we've talked about how to get a bank loan almost for sure guaranteed. Here's the next tip. Have a savings account, not just a checking account. You're going to look more favorable to certain companies if you also have a savings account. This doesn't mean you have to stuff it full of money. It just seems to make a difference that you have one open. And here's another story. I was turned down once years ago, because I didn't have a savings account. Now, the funny thing is, I had a money market fund, but they didn't count that and had to be in a bank. A short time later, I was talking to a friend of mine who, at that time already, was a multimillionaire. I found out that he got turned down by the same company for the same reason. No way. Here was the difference. He was one of their shareholders. All right, number three, keep a landline phone number. Now, this seems kind of odd, doesn't it? It does. It's like, what? But some companies seem to feel that this demonstrates a certain stability, and they reward you for it by extending credit. So at least while you're trying to establish credit, maintain a landline phone number. And you don't have to spend a whole lot of money. No. In fact, I used to have a landline account that was simply for emergency purposes, because I do all of my outgoing calls on my cell phone. So it's really next to nothing to do it this way. And I heard this from a friend who was told by a company that they highly preferred to extend credit to people with landline phones. So that's the reason we're making the recommendation. And Leah, thank you so much for sending us your big challenge. If you have a big challenge for us, contact us through our website at Big Success. That's BigWith2G's Success.com. That's also where we have a written summary of today's show. And George, let's get our big quote for the day. We thought it was only appropriate to have our big quote by someone whose face is actually on one of the bills we spent, right? Yes. Benjamin Franklin said, remember that credit is money. So establish your credit and score. You sound like a soccer announcer. That'd be score. Next time, we'll talk about why work-life balance doesn't work. And until then, here's to your big success. The Big Success Show at B-I-G-G Success.com. [MUSIC PLAYING] [BLANK_AUDIO]