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How Do I Establish Credit If I Don't Have Any Credit?

You will see a lot of younger people wondering how to establish credit if they have no credit at all. When you are just getting started it seems like everyone is telling you that you need to have established credit before they will give you credit. If no one will give me credit how to I get credit? It sounds like which came first the egg or the chicken and for all practical purposes it is a catch 22.

What I have found is that in order for you to establish credit its just a matter of applying for credit with some creditors that are more likely to help approve you for credit. These types of accounts can be the department store accounts and gas card accounts. Sometimes they will approve you for credit with a very small line of credit even if you have no credit at all. Your credit limit will be somewhere in the area of $200 to $300 because they don't know what your paying habits are and they don't want to give you a huge line of credit until they get to know you as a customer and you start to prove to them that you can handle a small line of credit.

As time goes on and you begin to make purchases and make your payments on time your line of credit will be increased. For the most part they will do this automatically because they recognize the fact that you could be a profitable customer for them later on down the line. Eventually you will receive a letter in the mail that says something to the effect of, "Congratulations your line of credit has been increased to $1,000". Make sure you don't get carried away and begin to make purchases up to your line of credit.

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If you are a college student there are a lot of credit card companies that will approve you for lines of credit any where from $300 to $500 because they know you have the potential to become a long time profitable customer in the future. It has been proven that once someone opens a credit card at an early age they are more likely to keep that credit card throughout their lives. People become sentimentally attached to their first card that's why so many credit card companies will go to college campuses and set up booths and give away free gifts in an effort to attract new customers.

There are a lot of people that don't think this is a good thing. They feel that some college students are being taken advantage of because they don't really know how to handle credit at such an early point in their lives. Some colleges and universities for that reason don't allow the banks and credit card companies to set up shop on their campuses. If a college student gets himself in to some serious problems with debt at an early age it can be quite devastating.

Just use good sense once you have established credit and pay off your balances when you get the statement. Also try to use the credit cards only in emergency situations. If you receive a congratulatory letter stating that your credit limit has been increased you can call up the company and have them decrease it to the original limit. It can be very enticing to make purchases once you have received such a high line of credit.

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