| Establish or Rebuild Bad Credit |
| By Credit Federal |
Published
08/16/2008
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Financial Tips
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Establish Credit or Rebuild Bad Credit
Piggybacking; getting listed as an authorized user on a credit account owned by a good credit person, is an excellent way to establish credit and to rebuild bad credit. With piggybacking, the payment history of the good person becomes a part of your own credit history. Of course, not just any credit account will work. You must get listed as an authorized user of an account which the creditor reports to at least one major credit bureau.
Another alternative is to get a secured credit card, because these cards have much easier approvals. With a secured credit card you deposit money which serves as collateral against your credit card purchases. Once again, make sure the credit card issuer reports payment history to at least one major credit bureau. The typical secured credit card has a line of credit available that's equal to the amount deposited. Learn more about how a secured credit card can rebuild credit.
Yet another option is a store charge card. The approval standards are easier, but the interest rates are high. Make sure the issuer reports to at least one credit bureau.
Whichever credit card you choose, just remember that the card is not an additional source of money, it's just a different way to pay using whatever income you have.
More Free Tips to Establish Credit
If you have no credit and no one to piggyback, it can be hard to get approved for your first credit card and loan. Here are tips on how to establish credit.
Since you are establishing credit because you have no credit history, you have no FICO score for lenders to review to determine your credit risk. So they have to examine other factors that can help them decide if you are a high risk or not. Here are other factors you can build on.
Bank accounts. Although a checking account doesn't get reported to credit bureaus, your account history can be a vital component when lenders consider giving you a credit card or loan for the first time. Also, the bank may eventually offer you a credit card.
Employment history. Another important factor lenders consider is your employment history. They want to see if you are able to hold a job or if there are periods of unemployment. Your ability to maintain steady income can improve the likelihood of getting approved.
Residence history. Lenders will also look to see how often you move and whether you rent or own. As with employment history, it pays to have a stable residence. Buying a home, even if jointly with a spouse, carries more weight than renting.
Utility payments. Most utility companies will let you put the utility in your name even if you have no credit (but they may charge a deposit). Having your name on a utility account won't establish credit, but it can be helpful for first-time borrowers.
Establishing a good credit history; and rebuilding bad credit, takes time. There are no shortcuts or tricks that can take you from no credit at all to a high score in a matter of weeks or months.
Beginner Credit Card Application
The best way to get approval for your first credit card is to submit a credit card application through an issuer that offers credit to people with no credit history. Search popular credit cards.
Often you can get approved for a store charge card or a gas credit card. Just make sure your payments will be reported to a credit bureau. Although these cards may be easy to get, they also come with a higher interest. Nonetheless, having a positive payment history with one of these cards can help you qualify for a major credit card later on.
Avoid submitting too many credit card applications, because each application may result in an inquiry on your credit report. These inquiries may scare off other issuers, thinking you are desperate for credit.
There are guaranteed credit card approval offers, just be sure you understand the limits of use, terms and conditions. Typically these cards; those that offer an unsecured line of credit, restrict purchases to a certain merchant or catalog.
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