Ways to Build Credit with a Young Family

3 Steps to Making it Happen (In Layman Terms)

Sometimes it’s hard for us average people with families to make ends meet. Most of us have regular 9-5 jobs and live paycheck to paycheck, enough to barely make ends meet. This makes it hard to look at things like unexpected medical bills or student loans and make them a priority in the financial aspect of our lives. Countless people just look at these bills, sigh, and think, “I’ll pay this when I get the money”. Some people never even open the letters they get in the mail, knowing what they contain.

Most people have heard of credit but don’t know what it is until they are wanting to take the first steps in buying a house or a new car. If this sounds like you, then you are in the right place. Below are three easy ways that you can use to get out of debt, and finally start to build good credit.

1st Step:

Obtain Your Credit Report

Obtaining your credit report is the first and most important step you must take to start building good credit. A credit report is different from your credit score in that it gives a breakdown of your credit history through time. The good, the bad, and the ugly. 

“Some people never even open the letters they get in the mail.”

There are three main companies that you must check to review your report. Those companies are Experian, Equifax, and Transunion. You may think, “How am I going to pay for my credit report?” The good news for you is that you don’t have to pay money to obtain your report.

Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 was enacted in 1970 to protect people such as yourself from unfair reporting. You have the right to obtain any information about you maintained by a credit bureau once a year FOR FREE if you meet the following conditions:

• You are unemployed but will seek employment within 60 days
• Adverse action was taken against you due to information in your credit report
• You receive public assistance
• Inaccurate fraudulent information was put in your file
• You experienced identity theft and report a fraud alert to your file

You can go directly to all three of the major credit bureaus’ websites to obtain your file. Once you have the report, you absolutely need to review it carefully! Look it over to make sure there are no errors, and that information obtained in your file is correct. Next, you need to start contacting your creditors.

2nd Step:

Contact Your Creditors

It can be easy to incur debt with a young family, and hard to save money. Chances are, one of the kids hit their head and you had to make an emergency room trip at some point, whether you could pay for it or not. Look over your newly obtained credit report. It will contain the name of the debt collection agency that holds your debt, and a way to get ahold of them.

Here’s some useful information; most debt collection agencies will NEGOTIATE with you to get that account in good standing. You can either agree to come up with a lump sum to pay off your debt for a lower price or can come up with a payment plan. The lump-sum method is always cheaper, but you may have to take the payment plan if you’re on a tight budget. Here are some tips for negotiation that are surprisingly easy:

• Do not agree to things that aren’t in writing
• If you don’t understand just ask questions
• Be extremely confident
• To get respect, give it, and vice versa
• Ask and document when the negative mark will be removed

Now that you have an idea of what you are going to pay, pay it! Even if that means buying off-brand peanut butter for a couple of months instead of Jiffy. Getting those bad remarks removed from your credit report is a CRUCIAL step to getting your credit together.

3rd Step:

Obtain a Credit Card

So, you’ve finally removed all the negative remarks from your report and are ready to get a credit card. Go ahead and pat yourself on the back! You earned it! Now, this next step can be harder than you’d think. Even though you don’t have any bad accounts anymore, you also most likely don’t have many good accounts for good reference. 

Why not do it as soon as you can?

There ARE credit cards you can get, even though your score is less than stellar. These cards are commonly referred to as secure or prepaid credit cards. The kicker here is that you essentially pay the credit card company a sum upfront to use their services. This can be hard to do with bills, school supplies, and grocery lists breathing down your neck. Remember though, you are better off than when you started, and you can save little by little to come up with the $199.00 (or whatever it may be) for down-payment. Here are some credit card companies that will work with you (and search hints):

• Netspend (netspend sign up)
• Citigroup (citi prepaid wirecard)
• Capital One (capitalone getmyoffer credit card)
• Discover (discover it)
• OpenSky (open sky $75 credit)

Narrow down a few cards by looking at the terms, DO NOT apply for all of them. If you apply for too many it will negatively impact your report. Apply for a couple and wait to hear back. Once you have the card you will just need to use it for a small purchase that you know you can pay off before the bill is due. Never be late on your payments, and let time do the rest. You’ll be on your way to good credit before you know it!

Even though it can be hard for people with young families to make getting good credit a priority, you’ll need to do it eventually. Why not do it as soon as you can? You may still be living paycheck to paycheck, but you’ll now have a means of getting that car or house you want. Now that the process has been laid out for you, it doesn’t sound so hard, does it?

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