Having a credit history,good or bad, will allow you to move through the complex financial world we live in. But what if you don’t have a credit history at all? For the most part, having no credit history is worse than having a poor credit history. But the question is before you now is, how to establish credit?
Secured Credit Card-This is a great way of starting your credit history. A secured credit card is different from a traditional credit card in that you must provide the credit card company with some collateral. This collateral is normally a couple hundred dollars. It is a deposit, so you will get it back. But what it allows you to do is use your card for purchases. By doing this and paying off the purchases you make, you are establishing a credit history. Many times the companies that issue these cards will extend you credit for making payments on time. Typically, a six month timely payment history will get you this benefit.
Gas Store Card-This type of card is usually easier to get that a traditional credit card. There are a couple of keys here to adhere to in establishing credit with this type of card. First, make small purchases and pay them off every month. You should do this with any credit card. Second, in making small purchases, only use this card to purchase gas. A convenience store is full of products you just don’t need to purchase with a credit card. Use cash instead. These card have high interest rates. Which is another reason to pay them off completely every month.
Bank Accounts-Yes, bank accounts. It does not take credit to open a checking or savings account. By opening an account at a bank you are accomplishing two things. First, by keeping your account in good standing, you are proving to the bank that you can manage money. Second, by proving you can manage money successfully, you are establishing a relationship with the bank. As a result, the chances of getting a credit card or loan through them are greatly increased.
Utility Bills-Phone, eletric, gas, water, and even cable bills are all examples of monthly payments that, if paid on time, can show creditors that you are worthy of getting a loan. For example, many mortgage lenders will use these bills as good credit history as part of the loan qualification process. Although these utility bills will not show on credit, they will allow you to establish it.
How do you establish credit? A great starting point is getting secured and gas store credit cards, opening and mainting bank accounts, and paying your utility bills on time. If you do these things, you are well on your way to establishing credit.