Imagine a friend tells you they are planning to buy their first car as soon as they graduate and get a job. They know they will need credit to get the car they want.

What advice would you give to your friend for establishing and maintaining credit between now and then? Include at least three details from the text in your response.

1 answer

That's exciting that you're planning to buy your first car! Establishing and maintaining good credit is definitely important for that process. Here are some tips to help you get started before you graduate and begin your job search:

Open a Credit Card: One of the best ways to build credit is by getting a credit card in your name. Start with a secured credit card if necessary, which typically requires a cash deposit that acts as your credit limit. Make small purchases that you can pay off every month to demonstrate responsible credit use.
Make Timely Payments: Consistently paying your bills on time is crucial for your credit score. Set up automatic payments or reminders to ensure you don’t miss any payment deadlines for your credit card or any other bills. This positive payment history will help boost your credit score over time.
Keep Your Credit Utilization Low: Try to use only a small portion of your available credit—ideally, below 30%. This means if you have a credit card with a $1,000 limit, aim to keep your balance under $300. Lower utilization rates signal to lenders that you are not overly reliant on credit.

By focusing on these three details—opening a credit card, making timely payments, and keeping your credit utilization low—you'll be well on your way to building a strong credit history before you apply for your car loan. Good luck!