Whether repairing bad credit, or establishing new credit, you can turn lemons into lemonade. While it can be frustrating trying to get credit, without credit, a few simply steps will get you headed in the right direction of credit worthiness.
Unless you’re last name is Hilton, or Winfrey, no one is going to send you a Platinum card with a million dollar credit limit. Building credit is a stair step of higher limits as you continue to pay your bills on time. All of your bills. The telephone, the cable, even the water and waste management companies report your history of payment. Habitually slow, or non payment is a sure fire way to live in a cash only world. Only buy what you can afford, and only what you are able to pay consistently.
When you have your finances in control, and are paying all your bills on time, you are building the foundation of good credit. To start on the pillars, or columns of the building, you need a credit card. Select one or two places where you stand a reasonable chance of being accepted and apply to them, and them only. What many people don’t know, is that submitting multiple credit card applications, causes several agencies to look at your credit, which can actually lower your credit score. Gasoline cards are good starters, as are home improvement centers. In an absolute pinch, a rent-to-own place can help you build credit, but understand that you will be paying 4 or even 5 times the actual cost.
An excellent way to get a credit card, is by obtaining a secured credit card. Certain banks will allow you to open an account with them, and then issue you a credit card based upon your deposit. $100, $250, and $500 secured credit cards are popular options. Make payments to yourself, and keep your available balance up. Before long, Mastercard and Visa will be sending you an application.
As you continue to pay all your day to day bills, as well as use your gas and secured credit cards, you should also be building up your checking and savings accounts. Lenders have a hard time extending a $10,000 credit card to someone with only $500 in their checking account. At the same time, while your checking account does grow, your bank should notice when you hit that $5,000 threshold, and may be the first to offer you a $1500 card.
Dress it Up
By now you will have established yourself as credit worthy, and as such, will have opened many new doors for yourself. When the time is right, refurnish your apartment or home with a ‘same as cash’ sale. Your credit history will be sufficient to make a substantial purchase, and the sale will allow you to spread the cost out over time. $5000 worth of chairs, tables and sofas over 36 months is about $150 a month. If it’s in your budget, it will be a great thing to show to your next creditor.
Kick It in Gear
Eventually you will need a big purchase like a car. If you have followed the steps outlined above and have a stable job, you should be able to secure a car loan. Consider a dealership purchase if possible. You may pay a little more, but you can be assured your payment history will be reported. That doesn’t mean you should rule out mid size car lots that will also offer financing. Just verify that your credit history will be reported. And of course, make sure you don’t buy a lemon.