How to Establish Credit
How to Establish Credit
Credit is not always easy to obtain, especially these days with all of the current problems with banks and the individual accounts. The banks love to entice individuals to apply for something from them by offering credit cards and the offers are often very attractive. In the past if you had good credit you could get a credit card with a Visa, Mastercard, American Express, or other branded card, and the best of all was that you didn’t have to pay any interest. With the recent credit crisis the banks and financial institutions are struggling to stay afloat, and therefore are increasing the requirements for any individual who wishes to obtain financial leverage from their banks. Fortunately, there is other options for someone with less than perfect credit or a young person just establishing their credit.
A great first step in establishing credit is to apply for student credit cards. Companies such as Orchard Bank and First Premier Bank have credit card options for people with limited or no credit history who are making purchases with their cards. In most cases you will be required to make a deposit and then purchase entry control. What these companies do is basically try and teach these individuals some responsibility and to also empower them with responsibility for their own actions. In order to receive this type of credit card you will need to make a deposit. What happens in many cases is that the credit is removed from your account and then written back onto your card after you make your purchases. It’s your responsibility to make sure the balance on the card does not bounce as this will result in default interest being charged on your purchases.
Pre-Paid Credit Cards – An Excellent Option
Another option for someone wanting to establish credit is pre-paid credit cards. Pre-paid credit cards allow you to create and deposit money which will then be credited to your account. The amount of credit you are allowed to have with pre-paid credit cards will be dependent on the company you go through. In many cases the credit limit will be between 100 to 300 dollars. The benefit to this is that with a pre-paid credit card you cannot go over your limit and do not have to worry about interest. Since you cannot spend more money than you have deposited you will not need a high credit score.
While pre-paid credit cards are great for establishing credit it may not be sufficient to cover all of your needs. For example, these types of cards do not report to your credit report, and in most cases there are no rewards programs associated with these types of accounts. Many times these card companies will require that you make a minimum payment each month in order to maintain your account. These cards are also easy to obtain. If you are looking for a good option for establishing credit consider getting a pre-paid credit card.
Secured Credit Cards – A Great Option!
If you have purchased a car or home and feel that you may be having difficulty obtaining credit due to credit in general, a secured credit card may be the answer. Secured credit cards require that you deposit a specific amount of money into a savings account, normally between $200.00 and $1,000. The amount you’re required to deposit will also determine your credit line. Secured credit cards are also great because in many cases you will be able to establish new credit.