How to Establish Credit

FEB 21, 2012

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It may seem like you have to have credit to get credit, so are you left wondering where to start? Applying for big name credit cards are not your only road to establishing credit. From checking your credit report to building positive credit history, find out how to establish credit.

Step #1: Check Your Credit Report

Just because you do not have a credit card, does not mean you do not have a credit history. Check your credit report for financing like student loans and auto loans, which are reported to the three credit bureaus, helping you to build valuable credit history.

Paying your bills on time and managing your accounts responsibly not only helps you build a positive credit score, but will also help you establish credit and qualify other credit cards and loans.

Step #2: Start with Smaller Credit Cards

Before applying for traditional credit cards that may require a high credit score or longer credit history, try submitting an application for a smaller credit card like a gas credit card, retail store credit card, or a secured line of credit. Secured credit cards function in the same manner as traditional credit cards, helping you build credit. The caveat is that a secure credit card requires a security deposit to obtain and use the card, but shows creditor that you are a responsible borrower.

Step #3: Build a Positive Credit History

Keeping your balances low and building a long history of on-time payments are the best way to build a positive credit score. Weighed heavily in your credit score calculation, these two actions can help you prove yourself to lenders when establishing your credit for the future.

On your road to building strong credit, avoid running up debt by charging what you know you can pay off every month. Interest charges can add up quickly, impeding your efforts to build a positive credit score and burying you under a mountain of debt instead. With a little patience and good credit behavior, you will soon embody the creditworthiness traditional credit companies and lenders look for in a borrower!