Credit Cards Key » CreditCardsKey » Secured Credit Cards » Best way to build credit?

  #1 (permalink)
: I'm18. I have no credit. I want to build my credit so one day I can get a loan from the bank to get a house.

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  #2 (permalink)
: Get a secured credit card. what you do is go to the bank and apply for one and put down a deposit, usually a minimum of 500 dollars, as collateral. Then they will give you credit card. Use your card and make purchases and pay it off in full every month. Do not exceed 30 percent of ur credit limit. Then you should be on your way to establish credit
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  #3 (permalink)
: First get a checking or savings account. Google several credit card companies that will give you a credit card, use it but ALWAYS pay, even if it's the minimum, always pay every month. Watch interest rates you have to pay to credit card companies, some are as low as 4%, some are as high as 27% or higher.
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  #4 (permalink)
: The first step is to do nothing right now. If you try to build credit now, then you will fail, and the attempt will make it take longer before you are able to build credit.

Of course, you're not going to listen to this advice, and you are going to try anyway.

After you try and fail, your next step is to wait more than a year. It takes one year, without trying even once, just to repair the damage that you do the first time you try.

Next, after you have not tried for more than a year, you make sure that you have a cosigner or proof of income, and then you apply only one time for only one secured card or only one Capital One card (not both). If you are denied, you stop, immediately, and wait more than a year before you try again.
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  #5 (permalink)
: If you don't have a job, get one. You'll need to be able to pay this back with your own money. You'll need a bank account, too - both savings and checking/draft/debit. Actually, if you're in the US, go to a credit union instead. They usually have better rates and service, and are more willing to help new members.

Start small - get a credit card with a low line of credit, like $500-1000. A gas card, like one from Shell or Mobil might work, or maybe one from a store in your area. A visa or master card issued by your credit union is a good possibility, too. The interest rate will probably be higher than others, but look for one with no interest if the balance is paid in full every month. If you can't find one like that, but you don't charge a lot, the interest charges won't be all that high any way. Think of this as an expense you pay to help build your credit.

I'm not a fan of the pre-paid cards, if only because you have to tie up your money any way. Besides, it's not credit that you can point to and say, "See? I paid it off". You're loaning money to the card issuer, not the other way around. It doesn't make sense. I'd also stay away from the cards that promise cash back. They get that from you by charging higher interest rates. Again, you're giving them your money up front, so they can give it back later. Why fall for such a gimmick? Some cards build points towards travel, and that might be useful at some point. But for now, I'd consider that a minor plus at best. Your goal is good credit, not enough points to fly somewhere, some time. Stick to the basics here.

Use the card sparingly, but regularly. Make a plan that builds towards a pattern of regular use and payments. For example - use it just for gas for the car. You were going to pay that amount every month any way, so aside from the interest, the card doesn't cost you anything, really. And it's building a credit rating for you. Of course, be sure you don't spend that money on something else that month!

Plan to pay your entire balance every month - EVERY month, 12 months out of the year. If you can't pay it all, pay off more - much more - than the minimum. I mean at least 5 times the minimum payment. Ten times the minimum is even better.

Every time you open your wallet to reach for the card, ask yourself if you really, REALLY need to put this on credit. If the purchase isn't part of the original plan, but it's just a convenience, do you really need to charge it? Can you afford it? Will it help you or hinder your over goal? Sometimes the answer is "yes, you should do it". But you have to make that conscious assessment first. You know your situation best, so it has to be you making the call here.

Best of luck, Kacee. Good credit is a great tool to have. It can open doors and let you do many things in life. Bad credit is like dragging a bag of bowling balls with you everywhere. You won't be able to do a lot of things you want to do, and everyone will know why.
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