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Building Credit From Scratch

If you are just entering the world of credit, you might be at a loss as to how to get started. Luckily it is not as hard to establish credit as it is to rebuild bad credit. Take a minute and get a little advice as to how to get started.

Your credit rating, as you will soon learn, has a huge impact on your life. It determines the interest you pay on loans and even whether or not you can get financing. It can also affect how much you pay for bills like car insurance and if an employer will hire you. Yes, credit is very important.

But how do you establish credit when you have none. It is not as hard as you think, but you need to take some action and the sooner you get started, the better. Here are some actions you can take to get yourself started.

1. Get A Secured Credit Card

It might seem silly to pay for a credit card but it can help creditors see that you can handle the responsibility that comes with credit. A credit card is a powerful thing and using them to pay for things does not feel like spending real cash. That can cause some to spend irresponsibly and then not live up to their obligations.

With a secured card, you put down a set amount of money and that is then your credit limit. Most are for around 500 dollars. You then use the credit card and pay on it monthly just like you would with a real card. The down payment takes the risk out of it for the credit card company and lets you show that you can handle the responsibility.

After about 3 months to 6 months of use, you should start seeing an increase to your credit rating.

2. Get A Store Card

Once you have established yourself with a secured credit card, the next place to turn is a store or gas card. These are the next easiest card to get and will set you up for a Visa, Mastercard or Discover in the future.

Gas cards are probably the best option when it comes to store cards because of the way you can use them and for the benefits.They usually give you a few cents off per gallon during the intro period.

Choose a station that you frequent often and put all of your gas on the card. Then at the end of every month simply pay the card off. Be careful to only use your card for fuel and not for products in the store. Also, do not let the card change your habits. If you normally spend $300 a month in fuel, don’t start driving more.

Using your card only for fuel and paying it off monthly will show that you are responsible and will help you build a solid credit history.

3. Use Experian Boost

Experian has a great little program that is helping to change the way that credit is earned. It is called Experian Boost and it can boost your score by 10 to 20 points.

To use this program, you first need to sign up for a free Experian credit monitoring account. Then, you give them access to your checking account so that they can see the bills you are paying. They then give you credit for regular utility bills that you pay.

Experian Boost will not help your other 2 bureau scores but it sure can benefit your Experian score. It is definitely worthwhile.

4. Wait It Out

If you are just starting out with credit, this is ultimately what you will have to do. A good credit score comes with time. Sure, you can do some little things to give it a boost right now but creditors want to now how you do with credit in the long run.

So, be patient, use what credit you have now responsibly and just stay the course. A good credit score will happen.

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