Daily Dupaco

Thursday, February 20, 2014

Creditworthiness: The early bird gets the worm

No matter where they finish, the competitors in Dupaco's Great Credit Race are all winners.

Really.

OK, so only one racer will walk away with the $500 grand prize for building the highest credit score. But by signing on to this six-month race and getting their first VISA credit card, all of these young racers have taken an important first step in establishing good credit early, says Jill Rothenberger, the racers' credit coach.

"It's so important to get a credit card with your local credit union right off the bat when you turn 18," says Rothenberger, a lending consultant supervisor at Dupaco Community Credit Union's JFK branch. "It can take you a good six months to a year to develop a credit score."

Until you establish credit, you’ll have a harder time proving your creditworthiness for things like buying a home, getting a job or even getting a decent rate on car insurance.

“If they don’t have any credit established and they go to get an apartment, some utility companies might even make them put a deposit down,” Rothenberger says.

Plus, establishing credit early can help drive up your score, since 15 percent of that magic number is based on the length of time you've had credit. A longer history gives lenders a better picture of your payment behavior.

But like anything in life, you can have too much of a good thing. When getting that first piece of plastic, turn to your local credit union to ensure you're not getting involved with a predatory lender, Rothenberger cautions.

Then, maintain that card – by carrying a low balance and by making your payments on time – for at least 12 months before thinking about adding another credit card to the mix. Opening too much credit too soon can have a negative impact on your score.

"Stick to one card right now. Down the road, you can always request an increase in your line of credit," Rothenberger says. "Besides, you don't want to be making payments to all kinds of different places."

By Emily Kittle

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