If you’re new to the credit game or you find yourself needing to re-establish your credit history due to a bankruptcy, job loss, or divorce, you may think repairing or establishing your credit is an uphill battle. You also might be discouraged by the preconceived notion that you need credit to get credit. However, there are several ways to establish or rebuild your credit history using credit cards.
Steps to Jumpstart Your Credit History
Whether you are striking out on your own for the first time, you’ve recently discovered a credit-free lifestyle has some serious financial drawbacks, or you have no credit cards left after a personal financial downturn, jumpstarting your credit history doesn’t have to be difficult. Implement any of the following strategies and a variety of financial opportunities to make your life easier will be at your disposal.
Provided that you have a steady source of income for at least six months, consider the following:
- Ask a trusted friend or relative with a good credit history to add you to his or her credit card account as an authorized user. An authorized user is a better option than a joint-account holder in that you are not sharing responsibility for the account and a credit check is not required.
- Open a department store or gas card. These types of credit cards may not rank high in the credit hierarchy due to high interest rates and the potentially limited purchasing power if the card you choose is accepted only by the establishment that issued the credit card. However, these credits cards, if managed well, can provide a great way to establish a credit history and usually the bar to entry is lower than a more universally accepted credit card.
- Establish a line of credit by opening a secured credit card or prepaid credit card with a cash deposit. The issuer is more likely to take a chance on you since your deposit is at risk if you don’t pay.
These suggestions are only to get you started. Your work is not done once you’ve obtained a credit card. Now you must begin the work of establishing a credit history with purchases and timely repayments. Jumpstarting your credit history takes time and the results of your credit actions are something you will manage for your entire adult life. Although you may be an authorized user or a department store credit cardholder today, in time the steps you take now will lead you to greater financial outcomes like a car or home loan that will support the basis of your everyday life.