Five ways to start building credit history: #1 Don't buy Yeezes
Submitted by bankd on Thu, 12/01/2016 - 15:27
When you have no credit history starting to build your personal credit can be a very difficult task. When I was still in college and had my part time pizza delivery job I was perplexed when banks and other lenders would tell me: “We can’t extend credit to you because you don’t have any credit history”. This was mindboggling and canned industry answer to anybody without any credit history. In return I would ask: “So how would I build my credit when nobody is giving me credit for the reason stated above?”. It appeared like vicious circle with no way out. So how one gets started? Well, here are five ways you can start building your personal credit: <p>■ You can do it the way I did. First and most important you have to have a job and income so you can show your creditors that you have monthly cash flow coming in therefore you have the ability to repay your debts. I had my part time pizza delivery job with probably $2,000 in monthly income. In addition you have to make sure you have nothing negative on your credit. Even if you have no credit you may still have negative record. I learnt that I had $87.56 unpaid electrical bill from my previous apartment which technically was the money owed to me by my ex-roommate. Since I was the one who signed up for utility it was my responsibility to clear this unpaid debt which I did. Then four or six months later I applied for Capital One $300 unsecured credit card. I happened to hear from somebody that Capital one was approving people with no credit history! When they approved me I felt like winning the lottery! Not many other banks in early 2000’s would take this bet on giving a whopping $300 credit limit to MBA student with part time pizza delivery job. To this day I am thankful to Capital One for my first card which I still have at that whopping $300 limit! These days I believe Capital One and quite few other banks would approve anyone whose situation is similar to mine. I recently saw Bank Of America approve my friend $500 unsecured credit card. He’s in early twenties, with no credit history but got a starting job with decent income and BofA approved him. Plus he had his checking account there which probably also helped. <p>■ Apply for secured credit card. Most banks will give you first credit card if it’s cash secured. If you put up $300 as collateral bank will give you $300 credit card limit. If you fail to pay back bank will grab your $300. Keep in mind that under this scenario as in all others you have to have stable job (at least part time) and income. <p>■ Another easier option is to have one of your parents (hopefully they have good credit) ask to be co-applicant on your first credit card. The only downside of this option is that your parents may be afraid that you will fail to pay therefore it will ruin your and their credit. I’ve know some parents who refuse to co-sign because they want to teach kids a valuable lesson. Personally I think those parents are mean. <p>■ Again, presuming you have parents with good (above 700 score) credit score you can ask one of them to be co-applicant on your first car loan. Downside mentioned above applies to this option as well. <p>■ Lastly lots of retailers these days will allow you to buy computers or furniture in credit. If find one that’s willing to do that for you should go for it even if it’s 24 month loan. This loan will help you to start building your credit. In summary it’s a process and it can be done as long as you are smart about this. And always remember when you get this first credit card don’t go crazy buying Yeezes* *I had no clue what Yeezy is until my 12 year old explained to me that it’s fantastic design $850 athletic shoe made by 2020 future presidential nominee Kanye West.