In financing, its worse to have NO CREDIT vs BAD CREDIT. People with no credit history find it harder to deal with a society that uses credit history to measure one’s credibility and financial worthiness. Banks, financial institutions, landlords, employers – they all look into an individual’s credit report when considering an application.
Yes, even landlords and employers check your credit history before accepting you as a tenant or as an employee. Even if you’re not thinking about getting a loan, without a credit history, it can bring about some problems with your finding a job or a place to live.
But what if you have no credit? Here are some things you can do today to start building credit.
Ways You Can Start Building Credit Today
Get a department store or merchandise card. A department store card works just like a credit card but you can only use it with one particular store. You can use this card to purchase items from the department store and pay it back by the end of the month. The difference is that department store cards are easier to obtain and does not require a credit history to get approved. In fact, many people who have no credit start with a department store card to establish credit.
There are several good merchandise cards available online. These merchandise cards tend to show up on your credit report just like a credit card ( if you get one that reports to the credit bureaus) . What I like about these cards for credit building is they give you large lines of credit. Most bad credit cards will give an unsecured line of less than $1000.00. While merchandise cards will give you a line of credit of over $5,000.00. That goes a long way in create a comparable line of credit!
Get a gas card. Just like a department store card, a gas station card is a credit card used to purchase gas from a particular gas station. These cards tend to be a bit easier to get approved for. But watch out for which bank is offering the card. I’ve found any credit cards backed by Bank of America are hard to get approval for. I’ve had better luck with cards backed by Citibank or Chase.
Just remember, whether you have a department store card or a gas station card, it’s important to pay off your monthly balances on time.
Open an account with a co-signer. Another way to build credit is to ask someone to co-sign for you. Banks or lenders will check your co-signer’s credit history and base their decision on their strength. Once you get approved, you can start building your credit history slowly. Always keep in mind that your co-signer will be accountable for all the debts you incur on the loan or credit card they co-sign for you. If you can’ make the payment CALL THEM. If you are late paying it effects their credit score. This is a HUGE favor they are doing for you. Don’t take it lightly.
Apply for a secured credit card. A secured credit card will require you to submit a security deposit, which will be used as your credit limit. This gives you the opportunity to not only have a nice nest egg in the form of your security deposit, but with a large deposit, you can also have a very large line of credit that will report regularly to the credit bureaus.
However, be aware that if you fail to pay on time, they will use your deposit as the means to pay what you owe.
Secured credit cards are a great way to build a good credit score inexpensively. Of all the credit cards used to improve credit, they have the lowest fees. It also has the most advantages to you, the consumer. After a year they will usually become unsecured and your security deposit is returned to you. Unlike some unsecured bad credit cards that give you a $500 unsecured credit limit, but then put $495 worth of fees on the card! Yes you can make payments on that fee,,,,but its a FEE! Why not save up the money and open a secured credit card!
These are a few of your options to start building your credit now. Remember, the key to building a good credit history is to pay your bills on time. Be constantly aware about your payment dates so you wouldn’t delay or miss in submitting your payments. Furthermore, be aware of your spending and make sure that you can afford to pay back what you owe.