When you're first establishing credit or rebuilding after a financial meltdown, you may become frustrated with the credit card companies because you usually need to have credit to apply for credit. The key to getting in to the credit cardholder's club is to know what kind of credit card you're most likely to qualify for. By handling your credit cards carefully from the start, you'll build a solid foundation for a healthy credit standing.
Store and Gas Cards
Often, those who haven't yet established credit don't immediately qualify for a major credit card, but qualifying for a store or gas card usually is easier. It's vital to ask whether the creditor reports to the credit bureaus each month, otherwise it won't help you to build credit. Such cards help you to create a good payment history, which major creditors view as a sign that you'll pay reliably when they extend credit to you.
Secured Cards
Another option for those who don't qualify immediately for major credit cards is to use a secured card. These cards are "secured" by money set aside in an account, which the lender may take if you don't pay your debt. For example, if you put $300 into your account, your credit limit will be $300. Like with retail or gas cards, it's important to ask whether the creditor reports to the credit bureaus each month. Also, look for a company that will allow you to upgrade to an unsecured card after establishing a good payment history. Curtis Arnold, founder of the website CardRatings.com, says that these types of cards usually transition within 18 months.
Unsecured Cards
Some banks offer credit cards specifically for those who are establishing a credit history. Bankrate recommends picking a bank and applying, but not applying for more than one card at a time, which may appear to creditors as signaling desperation. Keep your balances below 30 percent at all times; even if you plan to pay a purchase off in full at the end of the month, as creditors may report to the credit bureaus at any point.
Considerations
While it's best not to carry a balance on your credit cards, you do need to use them so that their activity is reported to the credit bureaus. Activity signals that you know how to handle your money responsibly. Use your cards at least once every few months, then pay off the balance so that you don't have to pay interest on it.
0 comments:
Post a Comment