Getting your credit history off on the right foot.
If you do not have a well-established credit history, you should begin to build one.
The best way to establish a credit history is to apply for a small loan or line of credit from your local bank or a credit card from a local department store. Ask whether they report to a credit bureau. If they don’t, having the card or loan won’t help you establish credit.
To get a credit card without a cosigner, you must be at least 18 years old and have a source of steady income. Gas cards are relatively easy to get. Apply for one and use it to establish credit, but pay it off every month to show that you can pay your bills responsibly.
Other options if you are having difficulty opening a credit account include asking a friend or family member to cosign your loan or credit card application or obtaining a secured card, which is guaranteed by a deposit you make with the card issuer.
If you’ve never had credit in your own name, it can be difficult to get a car loan or credit card. Having no credit history can be as much of a problem as having a bad credit history. Students, other young peole, and newly divorced or widowed women who have always obtained credit jointly with their husbands often find themselves in this situation.
It seems like a vicious circle: you can’t get credit because you’ve never had credit, but you’ve never had credit because you can’t get credit. What’s a person to do? Don’t despair. Here are a few tips to help you establish credit in your own name.
Applying to a number of credit cards in a short period of time can decrease your chances of getting approved. Lenders see this activity on your credit report and steer clear because they think you’re getting in over your head, so pick and choose carefully and have a plan of action.
If you can’t get a small loan or gas or department credit card on your own, try to find someone to co-sign for you. Again, make payments regularly and on time.
If you don’t have a checking account, open one. You have very little credibility with lenders if you don’t have at least a checking account and preferably a savings account as well.
Just as importantly, be sure not to overdraw your bank account. Bouncing checks sends a signal to potential lenders that you can’t manage your daily finances and are therefore not a good credit risk.
Know what lenders and credit card issuers look for when issuing credit. There are other factors that affect credit approval besides just your payment history, such as how often you move and how often you change jobs. It also helps if you’ve had an apartment or utility in your own name. If you don’t have a telephone number in your own name, you may find it more difficult to get credit.
If worse comes to worst, you may find it necessary to get a secured credit card. These cards require you to deposit money in an account to secure the loan or credit limit, and they often have fees and higher interest rates. If you default on your payments, the lender takes the money from your account. After a few months of making payments on time on the secured credit card, you may be able to obtain a regular credit card. Remember to make sure the company reports to a credit bureau before applying for a secured card, or the card won’t help you establish a credit history.
Being rejected for credit can also look bad. Apply only to cards whose requirements you are likely to meet. Read the small print and call the company to make sure your income and other factors qualify you for the card. Just because you get an offer in the mail doesn’t mean you qualify.
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