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How do I start establishing credit?

How do I start establishing credit?

The idea behind establishing credit is proving that you are a worthy borrower. This means borrowing money and maintaining a perfect payback record. Consumers desirous of establishing a good credit record should start off by applying for a credit card. The companies that monitor credit history compile information based on your payments and responsible consumers build up a good credit report by promptly paying off what they owe. However, if you do not already have established credit, some credit card companies will not approve you, this is frequently called a thin file consumer (there is not much info in their credit bureau). So another option is to apply for a secured credit. This method lessens the lender's risk by having access to some kind of guaranty from the borrower in case of default (a.k.a. collateral). One additional option to establishing credit is to have someone cosign with you. This lessens lenders' apprehension of qualifying someone with no credit. That is because if you default on the payments, they can always go to your cosigner for payment since he/she is also on the paperwork. However this is not recommended since the idea of building credit is to borrow and payback ASAP. You never want to default on your payments.  If these methods do not work, you can also apply for store cards or gas cards, which carry lower limits and are easier to be approved for.


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