As you get older it's important to establish a credit history. You need credit for a lot of different things which include obtaining a loan, renting an apartment, and some job requirements. It can be a difficult process because not everyone is willing to extend credit to people, especially during these economic times. It can be frustrating for people because you can't build a credit history if nobody wants to extend it to you. So, you should understand what lenders want.
If you no credit history, lenders will often look at other areas of your financial history in order to extend you credit. They will look at bank accounts, your employment history, your residential history, and utility bills. Even though you do not have to have a credit score to open up a checking or savings account, when you apply for credit, they'll ask you for your bank's name. Many lenders also ask who your employer is and how long you've worked for them. Many also ask for your salary to see if you would be able to afford the credit line. Your residence plays a part because having a stable home looks good on paper. They will check to see how long you've been there and if you own or rent. Utility bills also carry weight around on your financial history. If you've established a good history with your electric, gas, and telephone company, it can be helpful because it shows you're responsible.
If you're unsure where to start when looking for credit, check to see if your bank offers credit cards. If you have a checking or savings account in excellent standing, the bank will see that you are able to manage your money. If you have a lot of bounced checks or a low balance, the bank may not consider extending credit to you because of your history. Also, banks like established relationships, so depending on how long you've done business there, they may be more eager to extend credit to you since they value your business.
You can also consider getting a department store credit card. Many stores offer you a discount when you sign up for the card, but they often carry high interest rates. Store credit cards seem to be easier to get, which you may want to consider if you're having difficulty establishing a credit history. Check to see if they report to the credit bureaus before you apply because if they don't, you're wasting your time. If you're approved, make sure you use it wisely. Because of the high interest rates, don't carry a balance on the card. Store cards typically have low credit limits so buy something small and pay it off in full.
If you're unsuccessful at getting credit at your bank or at a department store, consider a secured card. Secured cards require you to pay the money up front and that is your credit line. You may not like having to put up your own money for a line of credit, but most report to the credit bureaus and report your history. Banks who offer secured cards will often change them over to regular credit cards after an established payment history.
Establishing a credit history takes some time and there's no fast way to do it. Your score will improve as your account history and payment history ages. So take the right steps down and maintain a healthy credit history so you don't have any problems in the future.
