Establishing Credit

How Can I Get Credit for the First Time?

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"How can I get credit for the first time?" is one of the most frequently asked questions we get asked. It's so common because so many people face this challenge: You can't get credit since you don't have a credit history, but you can't have a credit history if nobody will give you credit.

This dilemma is especially common for young adults, immigrants, widows or widowers. Here are a couple of suggestions for ways to open your first accounts to kick-start your credit.

1. Open a Secured Card

A secured credit card uses a savings account you open as "security" for your spending. Your credit limit is essentially how much you deposit in the savings account.

You can use the card for purchases and the payments will be reported to the credit reporting agencies, Experian, Equifax and TransUnion. Making on-time payments will help you establish a solid credit history.

A few things to keep in mind when looking for the right secured card for you:

  • Some secured cards can have high fees, which will cost you or cut into your savings.
  • Double check with the credit card issuer that they report information to the credit reporting agencies.
  • Always pay at least the minimum payment by the due date, preferably the balance in full so interest charges don't add up.
  • Set up automatic payments for at least the minimum payment due so you don't miss a due date as late payments can really damage your credit score—especially when you're first establishing one.

2. Apply for a Retail Credit Card

It's often easier to be approved for a retail card than a bankcard, especially for first-time cardholders. Retail cards are intended for use in a specific retailer or group of retailers.

Retail cards generally start out with low credit limits, but if you are approved, you can start to build your credit by making small purchases, then paying off the balance on time every month.

Some tips for managing retail cards:

  • Don't carry a balance on a retail card. In exchange for easier approval, you get higher interest rates. Carrying a balance will cost you too much in fiances charges.
  • Always pay at least the minimum payment by the due date, preferably the balance in full so interest charges don't add up.
  • Don't apply for many at once. Pick one retailer that offers a card and start there.
  • If you are not approved, try one of the other methods described here. Some retailers offer rewards as an incentive for credit card loyalty, which can save you money.

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For a few additional ways to start to build credit, read the following: