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If you just finished school, you may not have a credit history yet. It can be really tough to embark on your new life without the ability to buy furniture, a car, rent a property for commerce or any other purchase or financial transaction that needs credit. Here are three quick ways to establish credit:
Obtaining a Stable Income
To establish credit, you need a regular income. Most people have income from a job, but you can receive a regular income from a trust fund, alimony, government assistance or even an allowance from your parents. All the creditors care about is that you have continuous cash flow.
As regards to time, you will have to show proof of a continuous, uninterrupted income for at least six months. An easy way of doing so is to get your money deposited into a bank account at the financial institution that you want to start reporting your credit behavior. After a prudential time, this financial institution will probably offer you a credit card with a small credit limit at first and then will offer you to increase it.
Getting Approved for a Loan
Ask for credit from a lender who reports to a credit bureau. If your lender does not report repayment information to a recognized credit-reporting agency, your attempts to establish credit will be wasted. Lenders are not required to report, so be sure to ask about their policy before you apply for credit. Only apply for credit with lenders who report.
Request only a small amount you are comfortable and sure you will be able to repay. You want to establish your credit, not ruin it before it can even show. Thus, make sure your income let’s you cover for the loan’s monthly payments and you have plenty of money left for any unexpected situation that may force you to increase your expenses.
Apply for a Retail Store Charge Card
Most national-chain retail stores issue credit cards that can only be used at their store. This type of credit card is usually referred to as Closed Credit Cards. Many major retailers will offer charge cards to first-time borrowers and will give you a discount on merchandise when you apply.
The interest rates are often high and credit limits low for first-time borrowers, but if you pay your bills promptly, it will help you establish a good credit rating. It also gives you the opportunity to obtain more credit. Stores often sell your name and address to other retailers so they can invite you to apply for their credit cards.
Be Careful with Your Credit Behavior
It is very important that once you start establishing credit that you pay your bills on time, every time. In fact, it is advisable for any new graduate not to attempt to establish credit until they have a savings account with a minimum week or two of salary in it. That way you will have a reserve that will aid you if you have unexpected vehicle repair bills or medical expenses you couldn’t otherwise afford without neglecting your debt payments.
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