How to establish credit, if you don't have any credit.
Okay, so you just turned 18, and you want to buy a new car. You go down to the new car dealership, pick out that shiny new vehicle, fill out an application for credit, and they tell you, “I'm sorry, but you have no credit history”. Unless you are Paris Hilton, and your father gives you about 20 million dollars on your 18th birthday, then you’re going to have to establish your credit the hard way: on your own. So how do you establish credit when you have no credit? The answer: credit cards. Credit cards are the easiest and simplest way, for anyone to establish credit if they have none.
What you need to do first, is start applying for gas credit cards. It is extremely easy to get approved for a gas credit card. Gas credit cards usually have very low credit limits, and this is why it is easier to get approved for one of them. Once you get approved for one or two of these gas credit cards, then use them, and pay off the balances on time for several months. This will start the process of establishing good credit.
Next, apply for a department store credit card, these are the second easiest credit cards that give approval to those individuals with little or no credit. Once again, charge items, and then pay the balances on time for several months. If you don’t charge items on the department store credit cards, then you’re not really establishing a good payment history. So don’t be afraid to use them. Just be sure you don’t get crazy and come home with an $8,000.00 flat screen television set, on your first purchase. Proceed slowly and with caution. Remember Rome wasn’t built in a day, and neither is establishing good credit. One of the most common mistakes that young adults make, is to charge up too much credit debt, too fast. Don’t get stuck into a credit card quagmire. Only charge what you can afford..
Now that you have established a little credit, it is now time to go for the major credit card. You can start by applying for one major credit card. This is only recommended if you have a steady income, and if you have been charging and paying off your department store and gas credit cards on time. Don’t apply for multiple major credit cards, because this makes you look desperate. Applying for multiple credit cards at one time, is a major red flag to the major credit card companies, which tend to view multiple credit card inquiries on your credit report, as a sign that you are in financial trouble. Try to go for a low credit card limit amount. Some credit card companies offer no-limit credit cards for an annual fee, but you’re not ready for those cards yet, as they require a substantial income and an excellent credit history. If at all possible, try to get a major credit card with very low interest and no annual fee. Charge items on this credit card and then pay the balance off, on time, for several months. Again, remember no $8,000.00 flat screen televisions yet.
After say a year or so, of paying the gas, credit, and major credit cards off on time, you will probably be flooded with pre-approved credit card applications in your mail box. Just remember never to get over-extended. Apply for one credit card every six months to one year. It is crucial to keep in mind that your credit follows you wherever you go, so if you establish good credit, then you will be opening doors to great possibilities, however, bad credit, will close doors to great possibilities.
Once you have established good credit, then always remember to pay your payments on time. Hopefully, one day in the future, you will be able to drive to the store in your brand new car, just like Paris Hilton, and buy that $8000.00 flat screen television set, with no help from your rich father, and all thanks to credit cards.
