As most young people who do not have credit can testify, getting credit for the first time can be a challange. Before applying for credit of any kind a work history needs to be established. Creditors want to know that you have the ability to repay. Holding the same job for a year is a good starting point, this creates an impression of job stability.
Choosing what kind of credit to apply for is important. Most local banks have credit building loans. These are small personal unsecured loans or personal loans secured by funds you have in the bank. The repayment period for a personal loan should be a year and you need to make sure the bank regularly reports to credit bureaus.
Have a family member place you on an existing credit card account as an "authorized user". This will be listed on your credit report and will help establish a credit score and credit history.
After getting your first credit card you should strive to make every payment on time.
Even a single late charge will appear on your credit report for up to seven years.
After 6 months of on time payemts, many credit card companies will allow you to increase you credit limit
which has a positive impact on your credit scores.
It is important to read the fine print on the back page of credit card offers. Interest rate should not be the only thing you look for. Very often offers sent to people with no credit or poor credit have initial fees and yearly fees attached. These fees can add up quickly and actually eat up most of your itial credit limit.
For many individuals their first form of credit is a secured loan. A loan that is secured is a loan that is guaranteed against some collateral. An auto loan is a good example. Some banks can offer a secured line of credit, which would be something like a credit card where the available balance is secured against some form of collateral
Try not to apply for multiple credit cards from various financial institutions simultaneously. Banks often frown on an application where the credit applicant's credit report has too many credit inquiries within a short period of time. If you are turned down for credit card application, then apply for a store credit card. It is generally easier to get a department store or gasoline credit card than a Visa or Mastercard.
Once you have obtained your credit card be sure to keep the balances below 50% of the max limit. Once the balances reach above 50% of the max limit it can affect your credit in an adverse manner.
Often, department store credit cards are easier to obtain. Those stores give out credit more freely because they know it increases their sales. These are good starter cards.
When you receive one of these cards, use it carefully. Most consumers believe credit card companies like cardholders who pay off their cards every month. Wrong! They prefer cardholders who maintain a balance and pay them interest every month. However, as your balance gets close to the limit, they start to worry that you won't be able to make your payments. So, to build your credit quickly, you should never charge your card up to more than 50% of the limit, and never pay it down below 35% of the limit.
When using credit cards for the first time make sure you use them for your normal purchases so you don't over extend yourself. It's okay to pay them off but doing so with 3 equal payments over 3 months will have a better impact on your score.