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Open Your First Credit Account

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Opening up your first line of credit and managing it responsibly can help you build a solid credit historyEstablishing credit in your own name is important and entities from mortgage and auto lenders to utilities companies and employers will use your credit history to weigh their decisions. For this reason, it’s important to have at least one credit account in your name to begin building a credit history.

You may already have credit in your name if you’ve opened a credit card account or taken out a loan in the past seven years. If this is the case, pull a copy of your credit report to examine where your accounts stand. However, if you have no lines of credit in your file, consider opening a secured credit card. You may qualify for a traditional credit card, but without a lengthy credit history, you may be required to pay higher interest rates. Secured cards, in contrast, are geared more toward first-time borrowers.

Whether you opt for a traditional or secured credit card, make sure you manage your account responsibly. Avoid carrying a high balance and only charge amounts you can pay off in full at the end of each billing cycle. Most experts recommend using less than 30 percent of your available credit. This strategy may help you avoid incurring unmanageable debt and damaging your credit score.

Once you have established a solid credit history, you may be in a better position to apply for other types of financing.

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