KNOXVILLE, Tenn. (WATE) – Credit is one of those things you don’t want to be without. But the credit game is a catch-22. You need a good credit history to snag the best deals on loans, but it’s very difficult to get credit without a borrowing history. Here are some simple steps to help newcomers or anyone starting over to build a credit history.
If you want to build a credit history you could become an authorized user. If a friend or family member has exceptional credit, pays their bills on time each month, request to be added as an authorized user to that person’s credit card. If you’re afraid that your prospect will say no, inform them that you are only requesting to be added to the account; the magic plastic card does not need to be in your possession.
You can also request that a close friend or family member with good credit co-sign a loan with you. Keep in mind that you are asking a lot because the co-signer becomes responsible for making the payments if you don’t pay. Co-signing loans for other people is risky. A 2016 survey found that 38 percent of co-signers lose money.
A lot of lenders offer secured credit cards to those who are new to the wonderful world of credit. For these, the lenders require you to make a deposit that is used as collateral. You typically receive a credit limit that’s equivalent to the deposit. Some lenders may refund the deposit and convert the card to an unsecured product after you have shown your ability to handle debt responsibly over an extended period.
You can build credit by applying for a department store credit card, This option, however, requires self-discipline. Department store cards aren’t as difficult to qualify for as standard credit cards, but they may be accompanied higher interest rates and fees.
Also, store cards without a Visa or MasterCard logo may be exclusive to the retailer, meaning they can’t be used elsewhere. If you take this route and quickly max out the card, you will do more harm than good to your credit profile.
Let’s say you are trying to restore your credit history, if you have recurring expenses — such as rent, utilities or a cell phone bill — you can request that the service provider report your account activity to the three national credit bureaus. Making timely payments — sometimes called your “payment history” — accounts for 35 percent of your FICO credit scores.