How do you get started building a credit history?

Building a Credit History

On your first attempt to get a loan or credit card, you may face a common frustration: you don't have a credit history. Some creditors will look only at your salary and job and the other financial information that you put on the application. But most also want to know about your track record in handling money, specifically, how reliably you've repaid past debts. They turn to the records kept by bureaus or reporting agencies whose business is to collect, store, and report information about borrowers that is routinely supplied by many lenders. These records include the amount of credit you have received and how faithfully you've repaid. Here are several ways you can begin to build a good credit history:
  • Open a checking account or a savings account or both. These do not begin your credit history but may be checked as evidence that you have money and know how to manage it. Cancelled checks can be used to show that you pay utilities or rent bills regularly, a sign of reliability.
  • Apply for a department store charge card. Repaying charge card bills on time is a plus in your credit history.
  • Ask whether you may deposit funds with a financial institution to serve as collateral for a charge card; some institutions will issue a charge card with a limit usually no greater than the amount on deposit.
  • If you're new in town, write for a summary of any credit record kept by a bureau in your former town (Ask the bank or department store in your old hometown for the name of the agency it reports to).
  • If you don't qualify on the basis of your own standing, offer to have someone cosign your application.
  • If you're turned down, find out why and try to resolve any misunderstandings.
  • I recommend approaching a small community bank or local credit union. Be honest and forthright, explaining your situation, either you have no credit, or bad credit. Request a "secured credit card" and open a savings or checking account there with a debit card. If you are refused, ask what steps you need to take to get both types of cards. For a secured credit card, you will have to make a deposit equal to the amount of your credit limit. Offer to have automatic deduction from the bank account to pay for your purchases. After a period of time, 6 months to a year, you can request that the funds securing the cards be released and its' status changed to a regular credit card.

I agree with this answer but I would also add that the chances of you getting any type of credit in this market are very low. I would advise you skip applying around because you'll lose points with each request. About 50% of credit unions and banks offer secured cards. I would check that route first.

After you have your secured card (s) about 6 months, you will see a rise in your credit score. After 12 months, it will be even better and the lender should review your account and convert to unsecured (if you've handled it well).

The last thing is keep all of your balances under 30% of your credit limit. Within 12 months, you will be sitting very nice.