How to Get Credit for the First Time
If you haven’t established any credit before, you may be wondering how you can start. After all, how can you get a credit card when no one will give you one because you don’t have credit? The answer is to start small. If you don’t already have credit established, chances are you won’t be able to go out and get a $10, 000 loan. You can, however, begin with small loans and progress your way to bigger ones over time.
Here is the good news. Establishing credit may be difficult, but it is much easier than recovering from bad credit! As the saying goes, “no credit is better than bad credit” – a statement which is very true! Let’s take a look at how you can start small and begin to establish good credit. If you do not yet have a bank account, start there. Your bank account information will not appear on your credit report, but having money in your account will increase your chances of being approved for a credit card. The more money you have in your account, the more likely you are to be approved for a card, and the higher your limit will be. It is also beneficial to show that you have a continuous income from a job or other source. This will show lenders that you will have the funds to make your monthly payments.
Once you have some money built into your bank account, apply for a credit card. When applying for a card, take into consideration which requirements you are likely to meet. If you only make minimum wage, don’t apply for a $10, 000 credit card. You will be denied. Rather, apply for a credit card that is within your limits. The less you ask for, the more likely you are to be approved. Another thing to consider when getting your first credit card is where you will get it. Gas store credit cards and department store credit cards are usually easier to obtain than a Visa or Mastercard from a large banking corporation.
After you have been accepted for your credit card, regardless of how much you have been approved for, you can start building your credit. Anytime you make a purchase, charge it to your card rather than your bank account. Then, be sure to make your monthly payments on time each month. After a few months of showing that you can be trusted to make your payments, you can try to apply for a visa or credit card with a higher limit. Keep in mind, however, that the higher your limit, the more chances you have to get yourself into trouble. Never charge more than you can afford to pay back. Failing to make your monthly payments will significantly affect your credit rating.
Establishing credit for the first time does not have to be as scary as it seems. Start out small by building your bank account and applying for a credit card with a low limit. After a few months of making payments on this card, you credit rating will begin to increase, allowing you to apply for a card with a higher limit.