start building your credit
Everyone needs credit. Credit helps you obtain a product or a service
when you want it or when you need it. A positive credit history is an
asset, not only when you apply for a credit card, but also when you apply
for a job or insurance, or when you want to finance a car or a home. A
good credit will play an important role in determining your future. Employers
increasingly check the credit rating of prospective employees.
However, it seems difficult to begin to establish credit if you have
not haven't financed a car loan, a computer, or some other major purchase.
If you have little or no history of credit, you'll want to begin establishing
a positive credit history as soon as possible. The most important thing
to do to establish and maintain good credit is to pay your bills on time.
Slow or missed payments are a sign to the lender that you are not capable
or have trouble handling credit.
Here's how to begin to establish your credit.
- Open a checking account - Balance your checkbook
each month so that you can be sure never to overdraw your account.
- Apply for a credit card. Credit cards are an excellent
tool for establishing good credit references. You can easily demonstrate
your creditworthiness by paying your bills on time and having a stable
relationship with a bank.
You'll find it difficult to get bank-issued regular Visa and MasterCard
credit cards. However, there are other forms of credit cards available
with for people with bad credit or no credit:
- Prepaid credit
A prepaid credit card works like a credit card, but acts like cash.
Because you prepay, there is no credit check. You open an account
and "pre-load" the card with cash up-front, similar to
a pre-paid calling card. Then you use your prepaid MasterCard or
Visa anywhere these cards are accepted.
- Secured credit cards
A secured credit card is a credit card secured by a savings account
that has been established in advance by the borrower. The amount
in the account usually determines the limit on the credit card.
- Unsecured catalog cards
These cards are great for shopping in particular catalog stores
and establishing credit. They offer generous credit lines than other
- Gas cards or Retail cards
Department store or gas credit cards are usually easier to obtain
than a bank-issued card with a Visa or MasterCard logo because the
balances do not generally revolve.
- Get you rent payment history reported. - With recent
changes, FICO's expanded credit score will include your rent payment
history. This will help many underserved people including recent immigrants,
college students, new divorcees and widows, and those who live on cash,
establish credit and improve credit score. Get
you rent payment record reported in your credit file:Rent
- Open a savings account - Make regular deposits and
try to avoid taking money out of your savings account. To help you establish
credit, some banks will allow you to take out a small personal loan
secured by your savings account.
- Optionally, you mayconsider asking someone with an established credit
history -- perhaps a relative -- to co-sign the account if you don't
qualify for credit on your own. The co-signer promises to pay your debts
if you don't. You'll want to repay any debt promptly so you can build
a credit history and apply for credit in the future on your own.