Dec 13 2011
Building up your credit can take time – but what if you have no credit to begin with? How do you build credit when you are just starting out?
If you are just beginning, you’ve probably run into the problem of being denied credit because you have no credit. How are you supposed to build credit if no one will give you a chance? It’s an age-old problem. The key is to start small, remain consistent and over time, you can develop a financial profile that will make it easy to obtain credit.
For those looking to establish credit, one of the easiest ways is to obtain a secured credit card. A secured card is one that you by depositing a certain amount of money. You are then allowed to use the card up to that amount. In other words, if you get this type of card and deposit $500, your credit limit on the card is $500. As you use the card, the card issuer will report to the credit bureaus, and your usage and payment history will help you establish a credit history.
Another option is to obtain a retail store credit card. These cards are relatively easy to get, but they do charge high interest rates. Using a store card wisely for about a year can go a long way toward setting you up with good credit.
When seeking to build credit, you may be tempted to run out and apply for several different credit cards. But be warned: you should definitely take your time when applying for new lines of credit. A flurry of new credit card applications is not looked on favorably by the credit reporting bureaus, or by lenders. Prove yourself first with the one card you have to establish and build your credit before you attempt to add other lines of credit.
You should keep an eye on your outstanding balances, and refrain from reaching the maximum limit on any credit card. Credit reporting agencies look at the ratio of total available debt versus the actual outstanding debt. If you have used a large portion of your available debt, it is a definite negative on your credit report.
One of the simplest things you can do to establish good credit is to pay your bills on time. Doing so will help improve your creditworthiness in the eyes of the credit bureaus, and will make you appear more trustworthy to lenders.