>Credit is one of life’s great catch-22. Say you’re fresh out of high school and want to get your first credit card. Who dutifully fill out forms and wait for the answer, only to discover that a couple of weeks after you have been rejected. Why? Because you have no credit history. How to establish a credit history? Well, you get a credit card, of course …
It is a frustrating puzzle, but fortunately there are some easy and inexpensive to build a credit history.
Tutorial: What you should know about credit cards
Are you sure you have no credit history?
First, make sure you really do not have a credit history by getting a free copy of your credit report. You might be surprised to discover that due to a gym or a student loan, you actually have a credit history. It can be very short, but may be all you need.
If you have recently been rejected by a credit card, you have the legal right to request a free copy of your credit report from the agency’s credit card company used to review your credit history. The three major credit reporting agencies are Equifax, Experian and TransUnion. If you have not recently been rejected by a credit card, you can still get a free credit report. Federal law allows you to get a free copy of the report from each agency once a year.
No need to pay to see your credit score (or lack thereof), and if you need to know your score or are just curious, you can use a free online credit score estimator tool to get a general idea of your score by answering a series of questions. (To learn how your credit report is calculated and how you can improve your score, read the Consumer Credit Report:. What is in it and five keys to open a better credit score)
“Without writing stories. Goodness is silent”
Unfortunately, these famous words of Johann Wolfgang von Goethe often ring true in the area of credit reports. Although it seems that no credit is a good thing, because it may indicate that it is financially capable of paying cash for every purchase I’ve made, lenders want proof that if you give money, not take it and run. If you have established that definitely do not have a credit history or a short story has not been enough to get approved for a traditional credit card, here are some of your options.
Get a credit card through the bank where you have your checking account.
You may not have a credit account, but you have a financial history with the bank that could help you get approved for a card. At least, you may be able to get a secured credit line – which means that the funds from your bank account can be used as collateral if you can not pay your credit card bill – or a secured credit card. A normal credit card is considered an unsecured loan, because there is no guarantee attached to it. Secured loans are very common, however. Auto loans and mortgages are two types of secured loans. Your credit limit credit card may not be very high, but you have to start somewhere. Once you have established a good track record, should be able to get a regular card, unsecured credit.
Note that while many debit cards have credit card logos on them and they work like credit cards at many stores, these do not help establish credit because the money always comes directly from your checking account. No credit in question. (For more information, check out credit, debit and charge:. Dimensioning the cards in your wallet)
Get a credit card from the store.
Store credit cards typically have low credit limits and approval requirements more lenient. It seems that all the shops these days have a credit card. These cards come with an account opening bonus as 10% discount on your first purchase, so the next time you need to buy something from your favorite store, go ahead and take advantage of credit card offer. Just make sure you have enough money to pay the bill in full when you arrive. Do not forget that you are trying to establish good credit! If you do not get approval for a store card, which does not mean it will not be approved for another, so try elsewhere.
Finance the purchase of the store with a supply of it as cash.
Especially during the holidays, the stores often allow you to buy items on credit with an agreement that lets you pay no interest for a specified period of time, usually 90 days. Since this is a type of loan that can help you establish good credit if you pay off over time. To avoid the payment of interest or hidden fees, make sure you pay the loan before the expiration period assigned, and be sure to read the fine print before signing. Deals like this can be found both in stores and online. (For more information, see credit cards affect your credit rating.)
Building a good credit history should be free?
A piece of advice rather poor often given to those who have no credit history is to have a small bank loan and pay it on time. This is a bad idea because it is a waste of money. You’ll have to pay interest on the loan, and no matter how good the interest rate is, why pay to borrow money you do not even need? It is not necessary to pay interest to establish good credit, and the only debt to be incurred to establish credit is the same time that occurs between the time that charges a credit card purchase and a couple of weeks When you pay the bill in its entirety.
Good Credit! Bad Credit! No Credit! … Bad Idea
Another bad way to establish a credit history is by purchasing a vehicle from a dealer who advertises “Good credit! Bad credit! No credit at all!” If you currently lack a credit history, which is doing better than a lot of people, and probably out of debt. Do not ruin that feeling of financial security, incurring thousands of dollars in debt to buy a car. An expensive car is not a necessity, and you can almost always be better off financially if you stick to any vehicle that you can pay in cash.
However, if you are already thinking of buying a car with cash through a dealer, you can go ahead and get the financing to buy the car dealership, and then pay the loan in full after having made a single payment monthly. In this way, you will pay minimal interest, but you establish a track record of responsibly reporting the use of credit and make a payment on time. Some people have even gotten better deals on vehicles in this way because the dealership makes much of its money from car loans financing. It can give a lower total price if they think they will be doing the interest of you, so although you will pay a monthly amount of interest in this plan is likely to succeed due to the low price on the vehicle . Just make sure you understand the loan terms and no prepayment penalty before signing off the “X”.
Although this tactic will not help with the component of the length of credit history your credit score, which could give you the boost you need to get an unsecured credit card that can hold then the years. (If the business credit score seems silly, you have options to play the game for more information, see Can you live a life free of debt and new reasons to say “No” to credit?.)
Of credit from a poor substitute for cash
Once you have a loan, be sure to use responsibly. One factor that makes your credit score is the amount of time your accounts have been opened. Even if you prefer to pay cash for all purchases, just keep your credit card account open to help you achieve that high credit score you’re looking for. Also, be sure to pay your bills in full and on time, and not open more cards you can keep track of. (To read more, check out Six credit card mistakes and must pay in cash?)
Being rejected for a credit card is frustrating, especially when due to your credit history is nothing but a blank slate, but it’s a shame to break the barrier. Once you are eligible for a regular card, unsecured credit, you can save thousands of dollars over your life through the use of rewards credit cards responsibly. Also, if you plan to take a mortgage to buy a house, have an excellent credit history will help you obtain a lower interest rate. Even if you prefer not to deal with credit, taking some of the above actions to begin to establish your credit history is a good financial decision.
