Use Those Credit Card Deals to Build Your Credit History
When you first get out on your own in the adult world, you quickly discover that, at least in developed countries, it’s hard to survive without credit. You also discover that, without a credit history, you can’t get credit. It’s one of those frustrating Catch 22 situations that doesn’t seem to have a solution.
Chances are good, though, that, just like everybody else, you’ve received several credit card deals in the mail. If you went to college, you probably saw them all the time. You may even have applied for one or two—and been turned down because you had no credit card history.
If you pick through those credit card deals and choose the right ones, you can use them, along with some other simple steps, to build your credit history.
Baby Steps
The secret to establishing a good credit history is to prove that you are trustworthy, reliable and stable. That makes you a good credit risk; in other words, the lender can be fairly sure that you will pay your bills.
The first step in proving your reliability and stability is to get a job and stick with it. Do a good job, get good evaluations, get your scheduled raises or advancements. That shows lenders that you are reliable.
Open checking and savings accounts. You’re trying to prove that you can handle money well. Keep good financial records and don’t overdraft, and build some savings. It proves that you are trustworthy with money, and you can use it to get a secured credit card (more about that later).
Pay all of your bills on time always. That means your rent, phone bill, utilities, car insurance and other bills. You will probably have to pay some hefty deposits to even acquire those bills, but it will be worth it in the long run. You’ll eventually get the deposits back, and you’ll be proving that you pay your bills. You can use these companies as credit references later.
Check your credit report and make sure it is accurate. One of the keys to credit is your credit report. Three companies maintain credit information on nearly all Americans: Experian, TransUnion and Equifax. Whenever you apply for credit, the lender checks your credit report, and that has a lot to do with whether or not you are approved. Unfortunately, these reports are often inaccurate and full of errors. It’s your responsibility to check them every couple of years and make sure they are correct.
Toddler Steps
Once you’ve established yourself as a responsible adult — which will probably take a couple of years—it’s time to use those credit card deals. This is a good idea even if you don’t plan to use credit on a regular basis. Someday you may want to buy a home or some other big-ticket item that you will need credit for. By getting a credit card and using it responsibly, you are building a reputation that will make that possible.
There’s a secret to applying for a credit card, though. If you apply, it will be reported on your credit report, whether you are approved or denied. If you are denied (probably because you don’t have a credit history), it counts against you and makes it even harder to get a credit card.
You want to make sure you are approved. One way to do this is to sort through the credit card deals you get and find the best secured credit card offer in the pile. Remember that savings account? You’re going to use it to a get a secured credit card. That means that you can only charge as much as you can pay for with your savings.
You don’t use the savings to pay off your balance monthly, though. That’s a “just in case” for the lender. If you default (which will wreck your credit history), the lender can take that money. But you’re not going to default; you’re going to use your secured credit card responsibly and make at least the minimum payment each and every month.
Bigger Steps
Once you’ve had a secured credit card for a year or so, and rechecked your credit report for accuracy, apply for a gasoline credit card or a retail credit card. They are usually easier to get than a Visa or MasterCard. Continue to use your credit cards responsibly and pay your bills on time, and before you know it, Visa and MasterCard will be filling you mailbox with credit card deals. Here are some final tips for managing your credit cards so that you build a great credit history:
• Again, always pay on time. That means all of your bills.
• Don’t apply for more credit than you need. Having too many credit cards sends red flags to lenders. Two to four credit cards is plenty.
• Don’t apply for credit every time it’s offered. You might get 15% off of today’s purchase by applying for a store card, but all those applications go on your credit report. Lenders are wary of people who apply for a lot of credit.
• Don’t max out your cards. Stay well under your credit limits. That not only shows responsibility and good fiscal management, it also leaves credit available for emergencies.
• Don’t pay minimum balances. Credit card deals are set up so that if you pay just the minimum, you’ll never pay it off, and you’ll pay a ton of interest. It also sends the message that you can’t pay more, which makes creditors wary.
It does take a few years to establish good credit as an adult. It also takes a few years to go to college or to learn a trade. It’s all part of entering the adult world and establishing yourself as someone who is reliable, trustworthy and stable.
Identity theft cases have become as common as dirt. The crisis US economy in at the moment triggers the rise of credit crime rate. Crooks do not even have to invent new more sophisticated ways to steal credit cards or identities themselves. Credit consumers struck by credit market crunch do not think much about protection against thieves now.
But now taking security measures against credit fraud is more important than ever. Say you discovered that you fell victim to identity theft. Do you have an instant action plan? Do you know what to do in order to minimize the grave consequences the fraud can bring about? Credit report freeze is the answer.
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Too much is never enough. Especially when it comes to money. Your income is the cap on the amount of money you can spend. But if you have credit cards, your buying power increases and your spending limits do not bother and restrain you that much. However, nearly every credit card holder would not refuse to have a bigger credit limit.
Even if you carry a no limit plastic, you still have a cap on credit card spendings. Your highest balance is usually considered to be your limit. But can you increase your credit limit? And how will it affect your credit score?
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Credit consumers, who want to highlight their financial standing, can find credit products that will fit their interests. There are the so-called status-credit cards on the market. Customers can choose silver, gold, platinum or black credit cards. All of them give certain privileges and that very status to their owners.
What is interesting, you do not even need to have excellent or good credit and really high income to get one of the status credit cards. They are available to bad credit owners as well. Let's take a closer look at Gold credit cards. Learn more about features, options and services that Gold credit cards offer.
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