Establish Credit without the Need for a Credit Rating
“I don’t have a credit history, so how can I get credit?” People who are attempting to open a credit account will most likely ask a question very similar to this one. The lack of credit can be as detrimental at times as having bad credit. That is, unless you find out how to convince a possible creditor that you’re worth the risk.
The crazy catch twenty-two: How is it possible to obtain credit if there’s no one out there willing to take the danger and give you credit because you don’t have a credit history? One possible way to begin is to request a letter of credit from a company, who wouldn’t normally report to the agencies, with whom you’ve had some commerce already.
One such example is your electricity provider. Many of these companies will readily supply a letter of credit upon request, even though most will only do so if you’ve been a customer for a year or more. Another option is your cable company. Once again, you would have to have been a customer for a year or more and have made your regular payments on time without default.
Whether you have a letter of recommendation for credit or not, a good place to begin is your financial institution. All banks these days offer credit cards and loans and provided you’ve had an account with them for at least a year they will probably give you a line of credit. To begin with, the interest rate will be high, but once you prove yourself worthy by making regular on time payments, this will decrease considerably.
Initially, your new line of credit will be small, but once again, if you prove yourself the bank will most likely offer you a bigger amount. Don’t rush into this, though - the key is to take “baby steps” at first. Any creditors that solicit you with offers should be treated with caution at this stage. The rule of thumb is to grant 6 months to 1 year before you take into account a new account, so that you avoid temptation and don’t risk losing it all.
Once you have started your credit rating rolling, it is very important to monitor it carefully. Request your free annual credit reports and check how you are faring since the time they gave you an introductory APR to date. It is vital to monitor your credit rating for the following reasons:
1. You may circumvent any fraudulent use of your account by someone you don’t know. 2. A identity thief might be stopped in their tracks before they damage your credit rating. 3. Any lost payments can be traced and it will tell you if your creditor is properly reporting your payment activities. 4. It is good “credit manners” to be aware of your own credit rating. 5. When you are aware of the status of your credit rating, you’ve more power when looking for a superior deal with a potential creditor.
When your hard-won credit is finally established, be careful that you don’t become tempted by other credit offers and credit debt options. Carefully check the interest rate and keep in mind your other expenses when you’re deciding whether or not to extend your credit. You don’t have to feel obliged to accept credit if you’re not comfortable about it.
Whilst it might be an ego boost to have a number of credit providers offering you money in advance, at all times, exercise caution. With caution you will maintain the good credit rating you have worked hard to reach.