Building a solid credit history is important for your financial future. Although getting started may seem difficult, here are a few suggestions for establishing your credit history.
- Co-Signer: most lenders and credit card issuers will grant credit to someone who doesn't otherwise qualify if a relative or friend with a strong credit history co-signs. Co-signing is a serious commitment because it affects the individual's credit and creates responsibility for the debt if you fail to pay.
- Secured Credit Card: a secured credit card requires a savings account with the credit card issuer. The savings account is used to secure the credit card, so you are not allowed to withdraw the money. Your credit card limit is a percentage of the amount in your savings account, typically 50 to 100 percent. Secured credit cards usually carry a higher interest rate and an annual fee, so you will want to upgrade to an unsecured card once your credit is sufficiently established.
- Retail Credit Card: qualifying for a retail credit card or an account at a local store is often easier than qualifying for a major credit card. Selecting a gasoline card is a better idea than opening a credit card at your favorite retail store. Purchase gas only and pay it off each month.
Getting started with one of these methods, keeping your card balance low, and diligently making payments on time will demonstrate you are a responsible borrower, paving the way for obtaining a major credit card, car loan or mortgage in the future.
While you can't erase a poor credit history, you can rebuild it,
but it takes time and a concentrated effort. Your credit report is
a record of your history and cannot be changed unless information
is reported in error. Beware of companies offering to "fix" or
"erase" your credit for a fee. Any actions available to a credit
repair service are available to you.
Your repair plan consists of paying off old debt and
establishing new "good" credit.
- Order a credit report to get a complete picture of all
- Create a budget and stick to it. Ensure your budget allows you
to pay more than the minimum credit card payments.
- Make each monthly payment on time.
- Put any extra money, such as a bonus or gift, towards paying
off existing debt.
- Avoid adding more debt. Cut up your credit cards to avoid
temptation, if necessary. However, it's a good idea to leave at
least one card open so you can use it to demonstrate your ability
to handle credit. As debt is paid off, build new credit by using an
existing credit card to make small purchases that you can pay in
full monthly. As time goes by, your new credit history will
overcome your negative history. The length of time depends on how
long your negative history existed.
- If you are unable to meet your monthly payment obligations,
immediately contact the lender, which is imperative if your loan is
- If you need help, consider a non-profit credit counseling
organization that provides debt management counseling and money