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BLB1980

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How can I get credit when I dont have a credit history

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STOP! Banks and dept stores can hurt you

Helpful to 3 out of 4 people

Be careful especially with department store credit of any kind. First thing you need to realize is that each line of credit will check your credit in one of two ways. Hard credit checks and Soft credit checks.

MANY department stores will do a hard credit check especially after 2008 & 2009. Ask what type of credit check they perform and if they report to credit agencies.

Hard credit checks hurt your credit score. Each hit lowers your transunion score by 3-4 points. To many hits and it looks bad! Creditors do not like to see many of these hits. Sometimes they are unavoidable like car loans, morgage loans, etc. However, many companies will perform a soft credit check that does not affect your credit score.

If you are looking to establish credit history don't go application happy. Do your research first. Prime example, Sears department store will perform a hard credit check and you are not guaranteed to get a line of credit but your credit score will take the hit.
Whereas, Kay's Jewelers in the mall will perform a soft credit check and you are pretty much guaranteed a $300-$500 line of credit to purchase an item.

My advice is simple and has worked for many of my friends rebuilding and just starting their credit history.

1. Apply for a capitol one credit card secure or unsecure. Forget the other card companies for now. Capitol One is a sure thing and will give just about anyone a card. The interest rate is a bit high but they are a sure thing even for bad credit, no credit, or starting credit. A secure credit card is still considered a line of credit to the 3 agencies. It builds your credit score based on three things I will mention later. Go directly to their website and apply. It is a hard credit check so do not apply for another line of credit or anything that is a hard hit for 3-6 months.

2. Go to the mall and investigate if it is a hard or soft credit check. Ask if they report to the major credit reporting agencies and which ones if they will tell you which ones. Are there any fees associated with the line of credit ie monthly or yearly fees. Pick the ones without any fees like Kays and Zales jewlers. Find out if you can be extended a line of credit without having to make a purchase right then and there. If everything looks great and fits the rules then get it, BUT DONT USE IT! If you do use it keep the balance under 20% of the total limit. More on that Later.

3. Open an Amazon account free no credit check. Open an ebay account. Open a PayPal account and tie all three to your checking account. After a year of having all three of these open and using them at least once a month you will qualify for lines of credit with amazon and Paypal. (great for boosting your credit score)

4. Within the first year of you trying to establish credit history have at least 3-5 lines of credit opened in your name i.e. 2 Capitol One CC's one secure, one unsecure. 2-3 others like department store lines of credit but only have 2 or less HARD CREDIT HITS on you. HARD BAD SOFT GOOD.

5. The most important part of all of this... Do not max them out. Avoid keeping a balance that is greater than 20% of the limit of the card or line of credit.

Here is how it works.

If you have $100 avail able and you charge $75 you have just utalized 75% of your available credit. No big deal if you use it. Just don't leave that balance owed on the card through billing cycles. The best way to build your credit score fast is to keep a small balance on each line of credit so you are making faithful NEVER LATE payments on each line of credit.

Easy rule to follow is if you have a card with $100 credit limit, keep a balance of $15-20 on it that you pay the minimum due every month and if possible set up auto pay on it so you never forget and NEVER PAY LATE.

Here are the big builders.

a. Lots of ontime or early payments.

b. Line of credit that has been open for a long time.

c. Multiple lines of credit (2-5) in good standing with NO LATE PAYMENTS.

d. High credit limit, low monthly balance. Always under 20% of total credit limit.

e. Most important is an increase in credit limit! (This can be done quickly with 2 secure credit cards from capitol one. You open them with $100 each then each month or two add $100. Secure means you will get your money back once the balance is paid off and you close the account so you are never out the money, its just like a savings account that earns you credit score instead of interest.

f. KISS Keep It Simple Stupid.

Start simple, get one Capitol One Secure credit card for $100.00 and use it to pay for your gas. If you charge $40 in gas get your smart phone out and using the app schedule a payment for $25 to be paid the next day from your checking account. Continue doing this for the first month always keeping a low balance that is never above 20% but always something on the card.. At the end of the month or when your finances allow add $100 to it. Keep doing this until you get to $500 credit limit. Then get another card, at this point you may qualify for unsecure but remember, you can increase the limit of a secure by increasing the deposit but you can not increase an unsecure as easily nor as quickly.

g. Finally, Credit is great to have but is an big responsibility and can ruin you for years to come if you abuse it. NEVER spend on a card that you can not pay off by next paycheck. Eventually you will have great credit that will not charge you high interest and fees. Then you can buy a house, car, boat, or whatever floats your fancy. In the beginning play the game and play it smart and you will be very rewarded.

Good Luck

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