No Credit History? Start Building One Now – Here’s How!
January 6, 2009 by CashAdmin
Filed under Credit Cards
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One problem many young people have, especially students and recent graduates, is that many do not have any credit rating whatsoever, good or bad. This ends up being a problem for those who are actually trustworthy individuals, but do not have the credit score to reflect that reality.
Many times, debtors are not willing to take a chance on lending money with no indication of creditworthiness. Although it may seem unfair to the aforementioned students and recent graduate students, this fact of reality makes sense to those lenders. After all, why take a chance on a loan when there are many people applying for loans who have clear credit histories and strong histories of repayment?
Fortunately, there are several practical methods of building a credit history brick-by-brick. One such method is to apply for a secured credit card (one that reports to credit bureaus). Instead of basing credit limit on credit history, it bases it on a one-time deposit. For example, if you deposit $1,000 to a secured credit card account, your credit limit will be $1,000. This credit card can then be used for staple purchases, such as groceries and utilities. As long as the individual repays this credit card back in full or at least stays on top of minimum payments, it will reflect positively on a credit history and will make it much easier to be approved for loans in the future!
It is important to keep in mind that credit ratings are higher if you use a small amount of your credit limit. Ergo, on top of paying bills on time, it is useful to spend only a small amount of your limit each month. The prospect of building credit from scratch may seem daunting to students and recent graduates. However, options exist, as it is in a debtors’ best interest to expand the pool of people to whom they can comfortably lend money. Much of the responsibility, however, rests in the individual. If a positive credit history is sought, then it is yours for the taking with the help of a secured credit card.
