If you do not have a line of credit, it may be difficult to obtain larger items if you can’t pay for them upfront. Most people use credit cards or take out loans to help finance large-ticket items like homes, cars, or schooling. If you have not yet had to do these tasks, but you know in the future you will, obtaining credit now would be a wonderful way to make sure you are able to buy things when you need them. Here are instructions on how to establish credit if you have never had any.
Start Off Small
Applying for a store credit card, like a Modells credit card, is the best way to start credit history. They are easier to obtain and hold smaller limits so you will not be able to keep charging a lot, possibly getting you into trouble financially. Apply for a credit card at your favorite department store, sporting goods store, or even a pet store.
When you are rewarded with a credit card, make a small purchase and pay it off before the credit card’s payment due date. Make sure to make payments on time and do not allow the finance charges to escalate or you could find yourself in a position where you cannot pay the minimum payment, leading to poor credit. If you make a small purchase every month or two and pay it off promptly, your credit well be established and you will have a favorable history.
Continue To Build
Once you have had a few payments under your belt, try applying for a larger credit card. Charge something on the card and pay it off right away so you start with a good credit rating with the card. Keep this card for emergency purposes or to purchase things you are positive you can pay off in full when the statement arrives.
If you are denied a second credit card, wait several months before applying for a new one. Multiple attempts at applying for credit cards will signify that you are desperate for credit and they will have an unfavorable impact on your credit history. Continue using your store credit card so your history builds a bit more before trying again.
Consider A Secured Card
If you are denied a store credit card, or if you don’t want to take the risk of being denied, go to your bank to ask if they offer secured credit cards. This option will allow you to get a credit card in exchange for money. This money is deposited into an account for safe-keeping in case you do not pay for the purchases you make on your card.
You will use the credit card in the same way as a normal one, with monthly payments and the risk of finance charges if you do not pay your bill in full. With this card, you may have to pay an application fee and an annual fee. The upside is usually within a year, with regular on-time payments, you will qualify for an unsecured card. Many banks will do automatic evaluations and let you know when you are approved.