Use a Credit Card to Build Credit
Loan rejections are common if you don't have a credit history. You need credit to build credit. But oftentimes, lenders and creditors will not approve your application if you have no prior credit history. Getting your first credit card helps establish your credit history and builds your personal score. Maintaining a good credit record with a credit card requires timely payments. Creditors send reports to the bureaus on a monthly basis. They report lateness, as well as responsible payment habits. Consistency is key with establishing a strong credit score. But before you can build your score, you must find a company that's willing to approve you for your first credit card.
Step 1
Work with your bank to obtain a secured credit card. If you were denied for a major unsecured credit card, apply for a secured credit card with your personal bank. Major credit card companies typically work with established credit card users. Applying for your first credit card witih these types of banks might end with a rejection. Start with your bank and request an application for a secured credit card. These cards are easier to get because you can qualify with no credit history or bad credit. Complete the application by entering your personal data, such as name, address, Social Security number, and employment information. Pay the required security deposit and then submit your application for approval. Minimum security deposits are between $300 and $500.
Step 2
Share a credit card account with another person. Becoming an authorized user on a credit card account is another quick way to get your first credit card. You don't have to apply for this account. Instead, the primary account holder contacts his credit card company to add your name to the account. You then receive your first credit card in your name and the credit card company begins updating your credit report. Make sure that the person chosen has a good record of paying his bills on time. As the primary account holder, he is responsible for paying the bill each month. Your credit score will suffer if he misses or skips payments.
Step 3
Go small and start with a retail credit card. The standard for obtaining a department or retail credit card is less stringent than obtaining a first credit card with a major credit card company. Visit your favorite retailer and pick up a credit card application. Complete and submit the application. It generally takes two or three weeks to receive a response. You can also apply for a store credit card in-person. The customer sales representative will request basic information and then process your request. Responses are instant; and if approved for the credit card in-person, you can use the account immediately.
Tips
Once you obtain your first credit card, keep your balances low and always pay the bill on time each month. Charging a lot and maxing out the account damages your credit score. In addition, your credit score suffers if you establish a habit of skipping your monthly payments or paying your credit card statements late.
Do not apply for several accounts back-to-back. Inquiries or the number of credit applications you submit are reported to the credit bureaus. Excess inquiries lower your score. Apply for credit when necessary and limit your number of applications.
