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Many
times people who have never had a
credit card
or any other form of credit think that the banks
will turn them down for lack of credit history.
While this may be true in some cases, no credit
does not mean you have "bad credit", and provided
you have a steady income, chances are you will be
able to obtain a credit card.
In fact, there are many banks that routinely offer
Visa or MasterCard credit cards
to first time applicants. Everyone must establish
a credit history somewhere! If you have employment
or other means of steady income, select a bank and
apply for their credit card. Don't run out and
apply at ten different banks attempting to
increase your chances, because that will actually
have the opposite effect. Each time you apply for
credit, whether it is for a credit card or a loan
of some sort, the lender makes an inquiry on your
credit report.
Rejections show up on your credit report, and
multiple rejections send off a red flag to
potential creditors that you are desperate for
cash- and therefore might have difficulty repaying
the credit.
If your first attempt to getting your first credit
card doesn't land you a card, there are two other
things you could do to start building your credit
to remedy the situation. First, head to your
favorite department store and try getting a store
specific credit card. These department store cards
are easier to get than a Visa or MasterCard, and
you will most likely be approved for one of these
cards even if you've never had credit before. Once
you have a department store card, buy something
and then pay it off when the statement arrives.
You might want to do this for a few months, making
purchases and paying them off when the statement
arrives. This will start establishing a credit
history, and it will show that you make your
payments on time. Once you've done this for a few
months, you can try to apply for the Visa or
MasterCard again. The banks will then have your
income and a credit history to use as a basis for
determining whether or not to extend you credit.
Another option to establish your credit when you
don't have any, is to get yourself a secured credit card.
Secured credit cards are limited to the amount of
money that you deposit with the credit card
company, so essentially, they are a debit card
that is not connected to a checking account. While
they have their disadvantages, a secured credit
card is a viable option for someone who is having
difficulty establishing a credit history and
obtaining their first credit card.
In the process of establishing your credit history
with your department store card or secured credit
card, it is absolutely critical that you do not
have late payments or miss a payment. However, you
may opt to carry a small balance from one month to
the next on your department store card as it will
show potential lenders that you are able to handle
an outstanding balance. For example, if you've
made a purchase or purchases that total $100 in
your first month, when you get your statement, pay
$70 and allow $25 to carry over to the next month.
When the next statement comes, pay the $25 and
half of whatever purchases you've made since your
last statement.
As long as you consistently pay your bills on
time, and do not carry a large balance from month
to month, you are establishing a strong credit
history. A few months of these good credit habits
and you should have no problem when you apply for
a Visa or MasterCard.
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