Building credit can be hard to do if you have little or no history of financial transactions. If you have limited credit experience, it can make it difficult or nearly impossible to obtain a credit card or loan. How can you build a credit history if you have no credit? The first thing lenders or creditors want to know when you apply for a credit card is what sort of financial track record you have, and they will examine your credit report or credit score to look into your past.
Below are a few tips that could help you on the way to building a solid financial foundation.
Open a bank account. It's a modest start, but these are financial transactions and they will help you create a credit record. Make a practice of using your checking and a savings accounts often by putting away money for a rainy day and by paying your monthly bills by personal check. Be aware that writing bad checks will defeat the purpose of having the checking account, so use the checking account responsibly.
Check your credit report. You can get a copy of your credit report for no charge at annualcreditreport.com. Be sure that the information on the report is OK, and look out for errors. Authorities estimate that nearly a quarter of all credit reports have incorrect information; if you have another individual's debt listed in your name it could harm your ability to obtain a loan for years.
Apply for a collateral-backed credit card. A secured charge card is one that has a credit limit that is guaranteed by cash collateral. The risk to the card-issuing bank is small, as they have your money on hand in the event that you fail to pay. Make sure that your card-issuing bank will give information about the card and your use of it to the credit reporting agencies. Collateral-backed credit cards have a tendency to have higher fees and rates of interest than unsecured cards; you don't want to use one if it isn't going to help you in any way. A credit card with a limit of as little as $100 could be effective if you use it regularly and pay your bill in a timely manner each month.
Be patient. You ought to use your bank account and secured credit card for a year or so, making routine payments. Waiting can be difficult, but building any kind of credit score takes a while. In time, you will establish a credit history that should earn you the ability to get better accounts and small loans.
Building credit takes time and effort, but it is well worth it.
©Copyright 2007 by Retro Marketing. Charles Essmeier is the owner of
Retro Marketing , a firm devoted to informational Websites, including Debt-Stopper.com, a site about
debt consolidation, personal bankruptcy and other financial matters.
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