How To Establish Credit For The First Time

Published: 02nd February 2010
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Lots of people are unclear about how credit works. This article will help you understand how to establish credit for the first time.



How Do You Get Started Establishing Credit?



Before you can enjoy the benefits of good credit scores, you'll need to establish your credit history. People don't start out with a good credit score automatically. If you've never had credit before, any lender or creditor who researches you will get the same answer from reporting agencies: "No Data Available." So how do you establish credit and keep your credit score high?



Step One: Get Any Credit You Can, and Use It Sparingly



Whether you're young and fresh out of high school, or your credit history is too far in the past, even if you've simply never used credit before, this tip will help you build good credit scores. Simply find something you need to purchase, something you can afford, and find a store willing to offer you a credit account for the purchase.



For example, housewares. If you need furniture, check all the retailers large and small, applying for credit. It might take a while - a lot of places might refuse you simply because of your lack of a credit history. Stay at it until you find what you need at a reasonable price, at a store that will offer you a credit account. You might be told repeatedly that "nobody is going to offer you credit," but ignore that and keep trying.



One possibility is to get a secured credit card, where your savings account acts as collateral on the account.



Step Two: Keep Your Credit Score High



After a couple years of stable credit use, you'll start to be seen as a desirable customer. You'll start getting reams of credit card offers. Don't get too excited - be choosy about which cards you apply for, and continue to use them wisely. Remember: good credit scores are built by making purchases and paying them off quickly.



Keep a low balance, and pay at least the minimum balance - or even the whole balance - every month. Paying even one day after the due date is a risk to your credit score.



Some other tips on building credit and keeping your credit score high:



1. Never cancel a credit card. Keeping those accounts open - even after you've stopped using them - helps your credit score.

2. Get a copy of your credit report every 6 to 12 months and review it.

3. Read your credit card bills carefully, and report any fraudulent charges right away. Always call the credit card company immediately if you can't find your card. Many companies only offer protection against fraudulent charges for the first 24 hours after the purchase was made.

4. Set security limits on your credit cards. This ensures that big purchases won't go thru unless you speak to the credit card company to authorize them.

5. Any time your credit or debit card is out of your hands, it's out of your control. There are true stories about bartenders using customers' credit cards to "tip themselves" by buying things online!

6. Get in the habit of checking your balance and recent purchases online at least once a week.



Follow these tips and develop the new habits described above, and you'll establish good credit scores in just a couple of short years.


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