Hi friends,
What is credit? How do I grow my credit? I’m not even sure what other important questions I should be asking.
My parents are immigrants and I’m also one. I moved to the U.S when I was 11. Unfortunately my parents didn’t have the chances that I had and they didn’t get much of an education. Sometimes I feel like I’ve had to navigate a lot of life in the US by myself (SATs, college applications, school loans, etc.) on top of helping my parents navigate it too. I’m a young adult now and I don’t have any guidance and would really like to start thinking about my future. I think credit is a good place to start. Any info/advice is welcome, I literally barely know much about the system. Thank you.
In: 6
Okay, so right now I don’t know anything about you. You’re just a person on Reddit. If I run a company that loans people money, then you are a complete unknown.
If I loan you money, will you pay it back? I have no idea. I need some information before I decide if I want to loan you money. Information like, how much money do you make? How much do you save? Do you owe other people money? How much? The last time you borrowed money from someone, did you pay it back on time? Have you ever declared bankruptcy? Have you ever had people sue you because you didn’t pay them back?
Those are all important things for me to know, if you are asking to borrow money from me. It helps me decide how big a risk you are. So, we have a system to figure that out. It’s called a “credit score”. There are several companies that can create an assessment of you, and determine how likely it is for you to pay back your debts on time. But if you have never had a bank account, never had bills in your name, and never borrowed any money, they don’t really have much information to go off of.
The first credit card you get is going to have a low borrowing limit, and a bad interest rate. Nobody is going to want to loan you a lot of money until they know more about how reliable you are. Generally getting a bank account, paying some bills that are in your name, and borrowing small amounts of money (and then paying it off) will help improve your credit score. It doesn’t happen instantly, you need several years of that to build up a good rating. But as long as you are paying your bills on time, you should be okay.
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