I am an unemployed young adult who have recently received a substantial amount of money. I don't have much credit and would like to purchase property. I would like to know how can I build my credit for financing? I have considered purchasing the property in full and financing a car for future credit opportunities. Please advise me on how to responsibly move forward.

Terry Says:

OK, the first thing is to realize that this “substantial amount of money” is likely a one-time thing.  You need to be very careful what you do with this money.  Your “friends and family” — if they know about it — will have plenty of ideas for you!  My advice:  put it in an insured money market deposit account in a bank.  Let it sit there without touching it.  That will take self-discipline.

Next thing to realize is that now you have “breathing room” to look for a good job.  That is the most important thing you can do to develop good credit.  You need a record of employment.  You need to do that before you consider buying property.  But if a car will help you get to your job, then you can use some of the money to buy a good used car for cash.  You won’t get credit at any reasonable rate because you don’t have a job!

Now you need one — just one — credit card.  Read the article at this link, describing “secured cards.”  They are standard Visa or MasterCard credit cards — but your “line of credit” is the amount you deposit at the issuing bank.   Start with a $1,000 deposit.  Charge a small amount every month — and then be sure TO REPAY IN FULL and ON TIME every single month. Pretty soon you will have a good credit report.  You can check it at www.annualcreditreport.com.

I’m so glad you wrote to me.  Now, please do listen to me.  This is truly an opportunity of a lifetime for you to gain financial independence.    This is not about what you DO with the money — but about what the money will let YOU do with your life!!  So leave it in the bank, where you can’t lose a penny– and start planning a better future.  And please do write back in a few months, and let me know how you’re doing.

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