Even though you may not need
credit today, it is important to take steps to
establish a good credit history now. As you will come
to find out, longevity is an asset when it comes to
your history and having no credit may even be worse
off than having a few blemishes.
The only way to build a good credit history is to
apply for and properly handle credit. Unfortunately,
for starters this is often a catch 22; since the
decision to grant you credit is often based on an
established credit history. So, How does one establish
credit?
Here are a few suggestions for starters:
1. First apply for store
cards (e.g. the Dillards charge card);
These lenders usually have less stringent approval
terms.
If approved, use and keep the card in good terms for
about six months to a year, before applying for a
major credit card (e.g. VISA).
- 2. Get a cosigner with a
good credit history;
Since both of you are liable for the loan, please keep
the account in good terms. You don’t want to repay
your cosigner’s benevolence by ruining their good
credit history and your relationship.
Apply for a major credit card of your own, in 6months
to a year.
- 3. Apply for a Secured
credit card;
These are special cards that require you to make a
refundable deposit with the lender in the amount of
the cards Available Balance. These cards, which are
offered by most major credit card issuers, provide a
great way for you to use your own funds to establish a
credit history. However, they often carry application
fees, annual fees, and higher interest rates.
Use them for six months to a year before applying for
a regular credit card. You will need to close the
secured credit card in order to obtain your security
deposit (plus interest, by some issuers).
Warning! There are many scams out there that prey on
desperate applicants by ‘guaranteeing’ instant
approval and charging exorbitant fees. To avoid being
a victim, apply for a secured card only from a major
issuer e.g. Capital One.
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Remember: if it sounds
too good to be true, it usually is!
