How to Establish New Credit

how to establish new credit

How to Establish New Credit

Building new credit sounds like a hectic task, but it’s quite easy. In fact, if you have a few hundred dollars lying around, it can be as simple as opening up several new secured credit cards to help build new credit, quickly and easily. With that being said, let’s discuss different ways that you can establish credit for the first time.

Secured Credit Cards

As mentioned above, secured credit cards can be a teriffic way to build new credit. There are many options in this area, too. I would suggest looking at the Capital One secured credit card as they are easy to get started with and they report to all 3 credit bureaus. These cards do have annual fees. The Capital One fee is $29 and requires at least $49 up front, which is acts as the credit you will be borrowing against. If you ever decide to close the account down the road you will get this money back, as long as your “bill” is paid for.

If you would rather go local, you can try out your local Credit Union as well. Most CU’s have their own secured credit cards that allow you to get started quickly. These will usually have annual fees as well.

One thing you should think about is that the more “credit” you have, the better it looks on your credit report. So if you have the money to add, then try to add as much as you can (as much as you’re allowed), without going broke. The key here is to make your payments every month and do your best to keep your credit utilization below 20%. This means if your credit line is $100, make sure you do not spend more than $20. This helps imrpove your credit score and keeps you from falling into any financial traps down the road.

Secured Credit Cards are a great way for anyone to establish, or even re-establish, credit as long as they are responsible. If you’re planning on putting a deposit of $500, and then going out and spending it all, you wouldn’t be helping your credit score as much as you may think. Just remember to make small purchases each month and make payment, on-time, each and every month.

Gas and Store Cards

For many people looking to establish credit, Gas or Retail cards can be an excellent way to accomplish this. In fact, many people who are repairing credit can give these a go as well. While you may come across co-branded cards for rewards, these cards are not the same. They are issued by the Fuel companies, not by Credit Card companies as a joint venture.

Gas/Fuel cards are not known to have high credit limits and there’s typically a lot of concerns with these cards. Just keep in mind that these cards should be used to establish credit. I would recommend making purchases once a month that can be paid back without worry. Do not start charging the card whenever you feel like, as this can cause you to end up with credit issues before you even start. Small charges, once a month. Keep it simple.

Retail cards (store cards) are another type of card that you can apply for to establish new credit. These cards can be anything from Macy’s or Kohl’s to Sony or Home Depot. While these cards are easier to get, just remember that there are usually higher interest rates, as well as annual fees, in some cases. Also, not all Store cards are easier to get approved for. Some cards, such as Amazon’s Store card, are actually just as difficult as normal credit cards.

Food for Thought

There’s plenty of cards that you can apply for, but focus on making sure that you do not keep applying for cards if you’re not approved. Your best bet is to stick with a secured credit card for 6 or more months, then apply for other cards, as long as you’ve been making your payments on-time, each month. You can even increase your credit limit on most of these cards, although some make you wait until after you’ve made some payments.

Increasing your credit limit is the best way to go, unless you decide to put that money into another secured credit card, which can help out as well.

Again, be smart, be on-time and keep your balances low. Good luck!