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How To Start Your Excellent Credit History From Scratch

[Thursday, February 28th, 2019]

Nowadays, credit cards are a necessary thing almost for everyone. Some people even cannot imagine their life without them. But also, there are people who only at the beginning of the way. So, what do you have to do to get the first credit card? Let’s consider the information which can be useful for beginners.

With no credit history you have several options, and the first option for you can be a personal loan. A small loan that is paid on time can help you to show some good credit behavior. You should choose the lender that charges minimal fees, low rates, and reports to the major credit bureaus.

The second option (and probably the best one) is a secured credit card. Secured credit cards are designed for those who want to build credit. They are reported to the three major credit bureaus monthly allowing you to build your credit history. When applying for a secured credit card, you are required to pay a security deposit. The minimum security deposit is around $200. Your credit limit will be equal to the deposit you pay. Some secured credit cards allow upgrades to an unsecured account.

Let’s consider pros and cons of secured credit cards

Pros

  • Limited or damaged credit histories are not obstacles to get them
  • Most report to major credit bureaus, so they can help you improve your credit score and rebuild your credit history

Cons

  • Fees, including startup fees, annual fees and/or deposit;
  • High APRs and it is best not to carry a balance from month to month on a secured card because of the high interest rates.

And you should make sure the deposit you make on your secured credit card is fully refundable.

It is also worth paying attention to the fact that secured credit cards issued by some banks can be upgraded to unsecured credit cards in the future, provided the card is managed properly. And you will be able to build your credit history further.

If you are a college student, you can apply for a student credit card. Student credit cards do more than just help you establish a credit history – they teach responsibility and good money management skills. Look for cards that offer cash back and get rewarded while establishing your credit history.

One more option for you to build a credit history is to become an authorized user on somebody’s card. For example, if members of your family have a credit card, they can call their credit card issuer and ask if it possible to add an authorized user. Note that authorized users do not bear responsibility for the credit. In case of abuse the main cardholder will have to pay all the fees. If you do not pay, it can affect both the history of the main cardholder and yours, and as a result you will not be able to build a good credit history. Therefore, it is better to comply with all terms. But before you become an authorized user, you should find out if this account will be reported by the bank and will show up on your credit reports. If not, then there is no point in becoming an authorized user.

There are different credit cards for people with no credit history. But before you apply, it is good to check credit reports. See if all information is correct on them. If you find any inaccurate information, you should dispute it with credit bureaus or reporting company. And before you submit your application note that you should not go on an application spree and apply for multiple credit cards. That won’t do any good to your credit and your chances to qualify may get even lower. Choose only one or two credit cards you like and apply online.

To qualify for a credit card, you should be at least 18 years old, some issuers approve starting from 21 years old though. Also, you should have stable income and the credit card issuer may check your employment.

Once your credit is on the mend after using one of these cards responsibly for a time, you will be eligible for credit cards with lower fees, lower APRs, and higher limits. No matter what method you use to build a credit history, if you don’t pay, you can never build a good credit history. So be responsible and pay on time. Good Luck!

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