What Is the First Thing to Do to Establish Credit?

Establishing a credit history can be tough because you need credit to establish a history but cannot get credit without first having a credit history. Fortunately, you may employ several steps to make your finances attractive to a potential creditor. The first thing to do among those steps is quite simple and can be accomplished by visiting your local bank or credit union.

Open a Checking Account

Opening a checking account is a simple first step to establishing your credit history. The amount of money you keep in your account doesn't have any affect on your credit but many credit card companies require you to disclose if you have a checking account when you apply for a card. Using your checking account also can give you practice managing money and paying bills, which helps you manage credit better and instills the importance of only spending what you can afford to spend.

Find Stable Employment

A credit card company wants to know that you have stable employment so you can reliably pay your credit card bill each month, The longer you are able to stay with the same employer, the better the employment looks on your credit card application. This shows your reliability and decreases the chances of you suddenly losing your source of income. If you have a sporadic employment history, it may be difficult for you to establish credit, because a potential creditor may view you as a bad risk.

Apply for One Credit Card

You don't need to apply for 10 or 15 credit cards to establish your credit history. In fact, applying for a large amount of credit cards can actually hurt your credit score because of all the inquiries into your financial record from potential creditors. You only need one credit card to begin the process of credit building. You should apply for an unsecured card without an annual fee. An unsecured card is a credit card that does not require a down payment to open the account. If the credit card company turns you down because of insufficient credit history, call the company and explain your situation. The company may just reverse course and issue you a card with a low spending limit based on your employment history.

Spend Wisely

Never use a credit card to make a purchase you cannot otherwise afford. This puts you in a financial hole and at the mercy of finance charges and interest fees. Use your credit card to make smaller purchases that you can pay off completely within a single 30-day billing cycle and always pay the bill on time. This helps you establish a positive history of using credit appropriately. If you are unable to keep the monthly balance of your card at zero, try to always make more than the minimum payment to limit interest charges.