6-step credit-building plan for a struggling single mom
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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Dear Opening Credits,
I am a college student and also
a single parent. I have a baby and a new baby on the way, plus I work part time
since my child support is only $390 per month. Don't ask me how I do it. I do
it but badly. I feel like I'm always going under the waves. I need my credit to be perfect when I
graduate so I can get a good job and apartment. Can you recommend a good credit
card that I can use now that will help me create a good credit score?
Obtaining a credit card, then using it
to develop a positive credit report and score is probably a wise idea. Future
employers and landlords might very well pull your reports and check them to
see how you've done financially. Lenders certainly will check your scores, too,
so if you're at all interested in buying a car or a home, proving your
credibility now will help you later.
That said, you have so much going on
that I fear for your ability to manage a credit card well. Advantageous
charging can take more work and dedication than many people realize. It can be
done, though, so this is what I want you to do:
- Access your credit reports. You can get
them from AnnualCreditReport.com for free, so pull them to make sure that all
the information on them is correct and current. If you see anything wrong or
negative items that should have aged off, dispute them.
- Spring for your credit score. You can
get your FICO scores from MyFICO.com for about $20 each. Higher scores are
preferable: 720-850 is considered
excellent, 680-720 is good, 640-680 is fair, and 350-640 is poor.
- Apply for the right card
in your scoring range. You don't have to have excellent or even good credit to
qualify for a credit card. Look for a card with a
reasonable interest rate and a low or no annual fee, and go over the terms and conditions page carefully.
You may want to check CreditCards.com's CardMatch tool. It will narrow your search to those cards for which you are likely to be approved. Apply for a card and
await a response. If you're approved, great. Stop there. If you're denied,
there's a problem that needs correcting. Maybe you have an old medical debt to
pay off before continuing the application process. Or you're reaching too high and
need a more appropriate starter card. Identify the problem and then fix it
- Develop a budget. This is
where you need to get organized! You have money coming in, so chose where you
want it to go. List all of your expenses in a current column, then adjust them
in a proposed column. Your aim is to make sure you have enough cash to go
around for all necessary bills, plus at least a little extra for savings and
- Choose an expense to
charge. When you have your card, you may be tempted to charge what you've been
denying yourself. This is how debt can accumulate, which you do not want.
Instead, select one necessary line item from your budget to charge on your
credit card on a regular basis. For example, it could be groceries. Each time
you go to the supermarket, swipe your card. Pay the bill in full before the due
date. By doing so, you'll be establishing a perfect borrowing and repayment pattern
that will be reflected on your credit reports. That information will be used to
build your FICO score, and as time passes, those numbers will rise.
- Pay attention to your
account! With credit comes responsibility, and yours is to make sure that
balances are right and payments go out when they should. Use online banking to
make it easier and check your statements at least every week. Make time for it.
is paramount. If life becomes chaotic, you'll dip under those waves, and you
and your children must stay afloat. If you need help constructing a budget,
contact a credit counseling agency and request an appointment with someone who
will assist you in that area.
I wish you the best of
See related: How your credit score is calculated: New credit
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Send your question to Erica.
Published: June 26, 2013