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Is No Credit Better Than Bad Credit?
The secrets to establishing good credit right from the very start. You've probably heard it your whole life, bad credit will ruin your chances of obtaining credit until you're old and gray. You won't be able to get that car/house/vacation loan you need later if you ruin your credit now. As a result, you've probably joined the ranks of millions who have decided that having no credit history is better than having a poor one, and you've managed to restrain yourself from applying for a credit card in an effort to keep your record "squeaky clean". What they don't tell you is that having no credit can be even worse than having bad credit. Why? You are an unknown. Unknowns are risky. Unknowns who are applying for a credit card with no credit history, or any other form of credit, are going to instantly raise eyebrows. Someone with bad credit history can be counted on to continue to have bad credit history. There are enough legal options in place that these individuals can be granted credit at an exorbitantly high interest rate and creditors will get their money-sooner or later. What do you do if you are attempting to apply for credit, or are planning on applying for credit in the future, and you have no credit history? There are a few options available to you to help you build your credit with very little risk. 1. Apply for a starter credit card. Starter credit cards are usually issued with students in mind, since it's this portion of the population that is generally looking to establish their credit; however, this is by no means exclusive. Applying for a credit card with no credit history with these companies is simple-they don't expect you to have one. Be aware, however, that there is going to be a price to pay for their lenience. The interest rates on these cards are going to be higher because you are an unknown. They don't know if you are going to reliably pay your balance or not, so they are going to hedge their bets. The best thing you can do is keep your purchases on these cards small, and pay them off in full every month. Do try to keep a small balance on these cards-use them to buy your gas, for example. A card with a $0 balance will work against you in the complex world of credit, so be prepared. Just don't overextend yourself. If you can't afford it now, you won't be able to afford it later. 2. If you are not a student and simply haven't taken the time to build your credit, look for a company with a reputation for examining your living situation. Do you have a job? How long have you been there? How often have you moved? Do you pay your rent on time? All of these things can work in your favor when it comes to obtaining a credit card that will help you to build your credit. 3. If you belong to a credit union, start there. Credit unions will have lower interest rates than most of their competitors, and how long you have been a member will work in your favor. 4. Keep your checking and savings accounts in great shape. This is your financial history, and it's going to be important when it comes down to evaluating your credit. Applying for a credit card (or any other form of credit) with no credit history may be difficult, but it can be done. Remember, just like your job you're going to be required to work your way up from the bottom rungs. Don't get resentful, and don't be discouraged. If you follow the tips listed above you'll be well on the way to building the kind of credit that will make applying for anything more a snap!
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This intel was contributed by taxman
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May, 2012
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