Easy Ways to Establish Credit

If you're just starting out on the road to establishing credit you may not know just how important a good credit history is to your future. Your credit history not only affects the rates you'll receive on larger purchases down the road, but it also weighs heavily into other areas of your life, such as becoming a factor in employment.

Don't Overlook a Co-Signer

Many first-time credit borrowers are asked for co-signers who already have established credit histories to help them obtain loans for larger purchases. If you are looking for an easy way to establish your credit, asking your parents or in-laws for a little help in this department may not be such a bad idea. In fact, when you obtain a co-signer with a good credit history, doors that may have otherwise been closed are automatically opened to you in the form of lower interest rates and higher credit limits. Because you have a strong foundation supporting you, creditors are happy to lend to you knowing that if you fail to uphold your end of the bargain, you have someone with a good credit history to lean on. The key here, however, is to make sure that you are responsible with the credit afforded to you since it is not only your credit history involved if you happen to default on a loan.

Retail Store Accounts

Retail store accounts from companies such as Macy's, Target, Sears, or Wal-Mart are great ways to establish credit. Typically these types of companies are more willing to extend a line a credit if you are just starting out. However, it is important to note that you should not expect to receive a $1,000 credit limit if you have not proven yourself creditworthy. Typically, what you'll receive instead is a credit limit that doesn't exceed $500. This is to help you restrain from overspending and provide you with a realistic credit limit that doesn't carry with it high monthly payments.

Secured Cards

If you find yourself unable to obtain a traditional unsecured credit card, secured credit cards are a great way to easily establish credit. Secured cards require you to put down a security deposit that functions as your credit limit. The great thing about secured cards is that even though you have basically put up your own money as a line of credit, paying your monthly bills on time still gets reported to credit bureaus and shows that you are capable of handling credit wisely.