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Establish Credit

Many people wonder how to establish credit even if they have never made a major purchase, There are many ways to establish credit and to start building a good credit history.

In order to obtain good credit standing, you have to have a credit card. However, there is a slight hitch; you can’t obtain a solid credit standing if you can’t receive credit in the first place. Therefore, here are some ways to establish your credit.

Apply for a secured credit card. How does this work? The amount of credit is based on the amount of money you deposit into a checking or savings account. The credit card company issues you a card (more akin to a debit card), and the amount used is deducted from your checking or savings account. After some time has passed, and you have paid your bill on time, you can ask the credit card company to issue a regular credit card. One well known company that offers this service is Capitol One.

Another way to establish your credit is to apply for a department store card. Once again, as long as you pay your bills on time, you credit rating will begin to rise. However, do not attempt to apply for too many cards, as the credit reporting agencies may determine you cannot handle the line of credit based upon your salary. When you receive all of those credit card offers in the mail, immediately check the APR rate as well as their terms and conditions. Not all credit card companies offer low rates. Once you establish credit, and are considered an account in good standing, you can contact the credit card company and ask for a lower rate. Depending upon your payments, line of credit, and usage; they will ascertain whether or not you qualify for a lower rate.

Also keep in mind that most credit card companies, who offer credit to anyone without any credit standing, may do so at a higher rate than for others who have established credit. Ensure you open a checking or savings account. You may need to give this information to qualify for credit.

These are some of the ways to establish your credit. Others may include applying for a loan; but since you do not have any credit history, you may be turned down unless you have a co-signer. The best approach is to begin with a department store or secured credit as mentioned. One other important note: Upon securing a credit card, you will be given a line of credit. It could be $500 or more. Do not run up your bills immediately. Do not use your card online, unless the credit card company has a Zero Liability Clause; and do not apply for other cards unless you are sure you can pay the monthly bills. Finally, ensure you pay a bit more than the minimum due. This can help your credit rating increase down the line.

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