A Legitimate Way to Establish Credit if You Don't Have a Credit History

Your credit score is based on your past history of credit use, according to major score provider FICO. Lenders want to see established positive records before they open an account for you. This makes it tricky when you are just starting out and have no accounts yet. Liz Pulliam Weston of MSN Money explains that secured credit cards are a legitimate way to establish some records that will eventually qualify you for other other cards and loans.

Instructions

1

Save several hundred dollars to provide as collateral for your secured credit card account. Pat Curry, a Bankrate financial site columnist, states that some banks let you get a secured card with as little as $300, but you may want to give more because your credit limit is tied into your deposit. You get a higher limit if you deposit more money as security, which lets you use the card for more purchases or expensive items.

2

Apply for a secured credit card with reasonable terms. Banks know people who apply for these cards do not have established credit or have past problems like delinquent accounts and bankruptcies, so they usually charge higher interest and fees. Curry recommends comparing several cards before opening an account with the best possible interest rate and fee structure.

3

Charge purchases regularly on the secured card and make all payments on time. You need to establish a history of responsible credit use. FICO explains that this means making transactions within your limit and never missing a payment deadline.

4

Order credit report copies after several months to ensure your credit history is being established. You get one free copy from Equifax, Experian and TransUnion every year, according to the Federal Trade Commission, as long as you place your order through annualcreditreport.com. All three of these credit bureaus should be reporting your secured card account information. Complain to your bank if it does not appear.

5

Ask the bank to convert your secured credit card account to a regular credit card when you have established good records for a year or two, Pulliam Weston advises. You should qualify for better terms after you have proven yourself for at least a year.