#how to build credit
How To Establish Credit For The First Time
by Jacques Sprenger on October 13, 2008
Want to build your credit? Here are some thoughts on how to establish credit for the first time.
How Do You Begin To Establish Credit?
I remember trying to establish credit in the U.S. five years ago when my wife and I returned from working in Mexico for 20 years. Our Social Security numbers returned the same message from every store where we tried to get some credit: No data available . So how does one begin to establish credit and finally obtain a credit card?
One of my colleagues at the school where I worked told me something that I had a hard time believing: No worries, you ll be swamped by credit cards offers 2 years from now. If you want a head start then build your credit by going to a store that will give it to you at a high interest rate. Buy something cheap that you need for the apartment.
First Step: Buy Stuff From Places That Will Accept Credit. Start Small!
This story applies to most young people who work for the first time and need to establish credit. Of course, in my case, we were both over 50 and salespeople could not believe that we had no history of credit. We did, but it was so long ago that even the credit bureau had forgotten about it.
So we went to the local furniture store and bought a big queen mattress and the frame to hold it. The salesperson was used to people coming from Mexico, and as long as they could produce a paycheck stub, she was happy to charge outrageous interest rates. And so we went from store to store looking for a chance to open an account. Sam s said no, J.C. Penney wouldn t even consider it, same for Sears (I think the lady was trying not to laugh), and so instead, we turned to smaller stores. Slowly but surely, we built up our credit with little mom and pop stores till we were able to buy a house 3 years later with no money down.
Here s a tip: start with a secured credit card to build your credit. Owning one will make it easier for you to apply for a regular credit card in the future. Here are some good options:
List of Secured Credit Cards
Second Step: Wait For Those Credit Offers and Manage Them Well
And lo and behold, after 2 years exactly, our mailbox began to fill with credit card offers. It seems that somebody had passed the word that we were to be trusted, up to a point. Of course, the rates were above 20% a year, so it was pretty imperative that we become choosy about how we d take on additional credit. So we kept the amounts low on the first two cards.
This is the secret of building good credit: keep the balance low and pay on time every time. Some people believe erroneously that paying one day late is no big deal. A few credit cards offer you a grace period which may be up to 3 days, but most do not. So pay on time as much as possible.