An Easy Way to Establish Credit
Let face it, without a credit history reported on a credit report, you are doomed to find any kind of financing anywhere. It seems that these days we are all grouped into a category based on a credit score! Anyway, knowing how important and powerful a credit report and credit score are, in spite of the fact that you don’t have any credit established yet, here are a couple of ways to obtain good credit. Just keep in mind that it takes anywhere from 6 months to one year to get a history established and some banks like to see a two-year history. It does take some time so be patient.
If you have a good stable job and can make payments, have Mom or Dad co-sign for a car loan. Don’t get crazy and buy a fancy expensive one as the promptness of payments will be rated and reported on your credit report. This is a really good way to start. If this is not an option for you, another really good way is to apply for a secured credit card. This is where you put up $500 as security for a $500 credit limit on a Mastercard or Visa.
Remember, your credit rating is based on how timely you make your monthly payments on a debt that is owed, over a period of time. So if you use the secured credit card for a purchase, don’t pay it back all at once. Make payments for more than the minimum payment that is due and pay the balance off over a short period of time. For example, buy a present for someone in the amount of $300. You have the cash in your bank account and would have used it for the present, but you are going to use your credit card instead to establish credit. Over a three month period, pay back $100 each month on or before your monthly payment due date. You will have to pay a small portion of interest on the balance owing, but that’s a small price to pay for the good credit rating you will be getting. This card is relatively easy to get since the lender will take your cash used as collateral if you donít pay the balance. Not all banks offer secured credit cards, so you may have to do some digging, but they are out there.
Once you have made payments on the co-signed car loan for approximately 6 months and you have a short history with a secured credit card, apply for a gasoline credit card or department store credit card. Department stores and gasoline stations want you to buy their products, so typically they will be inclined to start you out with a small credit line. Be careful though and not abuse the credit that has been provided to you.
If you follow these steps and maintain good paying habits you will be on your way.
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