Starting From Scratch
by Credit.com
Life without a credit card in the United States can be hard. No only do you face
challenges when renting a car, shopping online, and accessing emergency funds, but
your loan rates could suffer due to a lack of credit history. Luckily, establishing
credit is easy! Credit.com details five easy steps for opening a credit card and
building your credit profile.
Step 1 – See where you stand. Have you had a credit card
or loan before? Have you had an account in the past 7 years? Have you never had
an account in your name? Check your credit reports
online before you start to shop for a credit card offer. If you have never had a
credit or loan account, your credit reports will probably be reported as “thin
files.” This means that there is not enough data on your credit report to
accurately evaluate. You may see that you have records on your credit report that
you didn’t expect. Co-signed and joint accounts could be reported on your
credit file. It will be easier to open a new account if there are some positive
records already on your credit report.
Step 2 – Consider your options. If you have never had a
credit card or loan account, you probably want to apply for a gas
card or a secured credit card.
These cards are easier for first time borrowers to obtain. College students opening
their first accounts should look for a specially designed student
card. If you have had credit problems in the past, a secured
credit card or pre-paid card
that reports to the credit bureaus may be your best option. You can shop
and compare credit card options today using our interactive service.
Step 3 – Apply for your card. Send in an application for
the card that you think fits you best. You should hear back from the creditor in
a few weeks by mail. If you are accepted, congratulations!, and move on to step
4. If you were denied the card, the creditor will send you a letter explaining why
and will offer you a free credit report. Try to apply again, this time for a card
that has easier acceptance standards, like a secured credit card.
Step 4 – Use you credit card responsibly. It is best to
use your new credit card at least once a month for small purchases. Keep your credit
card balance below 35% of the credit limit. Pay your balance in full and on time
each month. If you use your credit card responsibly, your credit score should start
to improve pretty quickly. Borrowers with no previous credit history could see a
credit score in the 600’s after 3-6 months. Borrowers with negative records
on their credit history will probably see a slower score improvement.
Step 5 – Once your credit score has improved and you have
established your new card for a few months, you may want to consider opening another
new card. If you previously opened a gas card, secured card, or a pre-paid card,
try applying for a standard credit card offer.
If your first account had a high APR or annual fees, you may want to close it after
you open the new account and start using it regularly. Closing old accounts can
harm your credit score and isn’t always a good idea, but it can be a smart
move if the card is expensive.
If you use your credit cards responsibly, your credit score will improve! Aim to
have between 2-6 open and active credit cards on your report in order to have the
best credit score. You can read more about managing and improving your credit in
the Credit.com learning center.
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