Building Your Credit History

Getting good credit is one of those things that can feel like a Catch-22 when you’re first starting out with the process of building your credit history. Most credit card companies are not interested in giving a good credit card to someone that hasn’t established a credit history yet. But of course, you have to be able to get those loans in order to be able to develop that credit card history. It can feel like a sticky situation and may even be really frustrating if you don’t know what you’re doing. However, it’s actually fairly easy to start building your credit history if you know what you’re doing.

The first thing that you should realize is that credit cards are not the only way to start building a credit history. They’re certainly important but you can begin to build your credit history first through getting other types of loans that may be easier to qualify for than a credit card will be. For example, most people these days have a cell phone which is something that requires a monthly bill payment. That’s the first way that many young people start developing credit and proving that they can make payments. Make sure to get your own cell phone separate from your parents’ family plan as early as possible (and make sure that it’s one which requires monthly payments, not a one-time fee). Similarly, you may be able to get a small car loan from your bank before you can qualify for a good credit card so you’ll want to take advantage of opportunities like that. Anything that lets you establish that you can pay monthly bills is a good way to initially start developing a credit history.

As you start showing that you can make monthly payments, you’ll be able to qualify for very specific types of credit cards. The first ones that you should try to get are department store credit cards and gas station credit cards. These are easier to qualify for than standard credit cards when you have not yet established a credit history. The keys to making sure that you develop a strong credit history with these cards is to make sure that you only apply for a limited number of these cards, that you use them regularly and that you always pay them off in full and on time. A good plan is to get one gas card and one department store card for a place that you shop at regularly. Make sure that you are aware of when payments are due and that you create strong credit by paying early.

The next thing that you’ll want to do is start looking at credit card offers which are specifically designed for those people who have no credit or very little credit. There are many credit cards designed for college students which are based on the assumption that the college student has not yet established credit. Make sure that you review all credit card offers carefully because you’re going to want to try to get a good card. You shouldn’t ever apply for too many credit cards at once because this weakens your credit score. Instead, apply for just one card that has a good interest rate, no annual fee and may even offer you some rewards for your spending. As with your initial gas and department store cards, you’re going to want to always make sure that you pay the card off each month in full in order to develop the strong credit history that you’re seeking.