What You Need To Know About Establishing Credit

A Beginners Guide To Obtaining Credit

You’ve probably heard the term credit before, but have you ever thought about what it means and how it affects you?  Credit is borrowed money a customer can use to purchase goods or services when you need them, with the promise to pay back in the future. Once borrowers prove they are dependable to pay debt, they are offered higher credit lines at better interest rates.

It’s almost impossible to function in today’s world without using credit of some sort. Without credit history, it is hard to get a loan, credit card and sometimes an apartment.

At the beginning of your credit journey, it’s usually difficult to obtain credit. Lenders rely on credit reports that provides important information about a borrower’s ability and character related to repaying debt. So how do you show you are responsible when lenders are hesitant to provide credit to those who have not yet established credit history?

It can be tricky, so here are some suggestions to point you in the right direction on your credit journey.

Secured Card

Applying for a secured credit card from your credit union is great for building credit because almost anyone can qualify for one. The line of credit is secured by the available funds in your savings account. Typically, if you use the secured credit card responsibly for six to 12 months, you can then apply for a traditional credit card.

Retail Credit Card

Applying for a retail credit card is another option used to build credit, and usually easier to acquire than a traditional credit card. However, retail credit cards tend to have a lower credit limit and considerably higher interest rates.

Authorized User

Ask a close family member to be added as an authorized user to their existing credit card account. The card’s history is reported to the credit bureaus, so it can help build good credit if you and the card-owner use it responsibly. However, if a payment is missed or large debt incurred by either party, credit will be damaged.


An easier way to obtain credit for the first time is to get a co-signer who already has good credit. A co-signer will be just as responsible for repayment of the loan as you are. Be sure you repay the loan as agreed so you do not jeopardize your co-signer’s good credit.

Once you begin establishing your credit, realize that it’s a lifelong privilege. Be sure to always pay your bills before the due date, never borrow more money that you can afford to pay off, and don’t use more than 30 percent of your available credit.

Federal law allows you to get a free copy of your credit report from Equifax, Experian, and TransUnion each year. It’s easy to check your credit report a few times a year at AnnualCreditReport and dispute any errors you find immediately.

Learning how to use credit wisely takes some discipline but it is worth the effort. Get into the habit of making wise decisions, and your good credit will last a lifetime.


About HSFCU Marketing

Hawaii State FCU firmly believes that financial education empowers people to make smarter decisions throughout their lives, resulting in a better financial future. We do this by providing useful financial tools such as educational blogs, online courses and free webinars on a variety of topics including planning for retirement, debt management and buying a home. For more information on these and other resources, including free financial calculators and budget-friendly recipes, visit www.HawaiiStateFCU.com and click on “Financial Health.”

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