Ways to Establish Credit for the First Time

17
February

This country’s foundations are based on credit and all those without a credit history will find it extremely difficult to make important purchases or even be able to find a decent place to live. It’s therefore important that we focus on building credit as early in our lives as possible.

The first thing needed is a job. Once a job is secured and the person is bringing in steady and regular income, they are in a position to begin building their credit history. After acquiring a job, the following should be done:

• Open a checking and/or savings account. When there is no credit history, a creditor or lender has to look at other components to determine whether someone is eligible for credit and bank accounts give an overall picture of how a person manages their money. A person can have their paychecks directly deposited into a checking account and these actions will contribute by showing proper money management as well as showing stable work and bill payment histories. Another good point is if a person maintains their bank account in good standing, their bank can be one of the first places to go to apply for a credit card with a fairly good chance of being approved.

• Seek out stores and companies that will allow purchases on credit, such as department stores and small retail businesses. Since the goal is to establish credit histories, you must be sure to pick stores that report activity to the credit bureaus. Keep in mind that this way of doing business will generate credit cards and plans that will have higher interest rates than regular credit cards but this cannot be avoided. Whether you are someone who is trying to re-establish your credit history after running into financial problems, or you’re a newcomer to this field, credibility has to be established and creditors charge high interest rates to cover themselves in the event of running into a bad credit risk. Other avenues to try are secured, prepaid and gas company credit cards. With secured and prepaid credit cards, the creditor will only allow a credit limit that has guaranteed coverage by the cardholder. For instance, the cardholder must deposit money into an account that is specifically linked to a secured credit card, or they can have the dollar amount loaded onto the card itself for a prepaid credit card.

• If one has been fortunate enough to find a job AND find a way to make purchases on credit, it’s safe to begin looking for a place to live. With a job and some history behind you, a landlord will be more willing to rent out an apartment. Once you have a place to live, you should continue contributing to your credit history by paying your rent and utility bills on time every month.

The keys to this entire process are patience and good money management. It must be understood that it will take time to build credit histories, usually a couple of years at the very least. Good money management is the very essence of maintaining a favorable credit history and this should be done by learning how to budget one’s money. Working with a budget should become a way of life. It’s only after years of practice that we become adept at knowing precisely what we can and cannot do with our incomes. It’s also the way to making sure we purchase and obtain only what we’re financially able to handle, and then following through with paying those bills completely and on time.

While credit allows for the convenience of getting the things we need and want when we may have otherwise been unable to do so, we must remember that credit is NOT money. We must handle credit with care and wisdom keeping in mind that the billing statements with a payment due date will eventually reach our mailboxes!

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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