Establishing credit can be a slow process, especially if you are bouncing back from years of poor credit, a foreclosure, or bankruptcy filing. But even if you’re establishing credit for the first time, finding loans and credit cards that you’re eligible for can be somewhat difficult. As you begin to establish credit, the following tips can help you along the way:
Don’t apply for too many credit cards
Although applying for credit is a crucial step in establishing your credit history, you also want to make sure you don’t apply for too many. Applying for a lot of credit cards in hopes that just one application will go through is not a good strategy, and you should only stick to offers you think you’re truly eligible for. You may not know for sure if you’ll get approved for a credit card you’re about to apply for, but some programs specifically state the minimum criteria. As such, it’s important to take note of it so that you know you’re not applying for something that you’re not ready for yet. Every application for credit is a hard inquiry, and hard inquiries have a negative effect on your credit score. Because of this, you want to apply for credit very sparingly, and only when you think you have a good chance at getting approved.
Get a secured credit card
If you can’t qualify for a traditional credit card, a secured credit card is one good option to consider, and can help you to establish credit faster. A secured credit card works very much like a regular credit card—you receive a line of credit, you receive monthly statements, and you need to make payments. The only difference is that secured credit cards are secured by your monetary deposit, which you’ll eventually get back, as long as you don’t default and your account is paid in full before you close it.
Note that secured credit cards are not the same thing as prepaid cards. A prepaid card works a lot like a debit card, and the only money you can spend is the money that you put on it. This money becomes your credit line and it isn’t a deposit. Prepaid cards can certainly offer their own benefits, but because you aren’t borrowing anything and you’re just spending your own money, they don’t do anything to improve your credit score.
Become an authorized user
A friend or family member with good credit can potentially help you establish your credit. If someone with good credit adds you to one of their credit cards as an authorized user, you can piggyback on their good credit habits and reap some of the benefits. You don’t even need to have access to the credit card or make any charges on it—simply being added onto the account can help give your score a boost. However, be sure that they add you to an account with favorable payment history and that has low utilization. Otherwise, if that person ends up maxing out their credit card and doesn’t pay it all off, or ends up defaulting on payments, being an authorized user can have the opposite effect.
Are you trying to bounce back from poor credit, but still have a lot of unpaid debts to settle? If you’re receiving structured settlement payments, Peachtree Financial Solutions may be able to help. By selling some or all of your payments to Peachtree, you can receive your money sooner and in one lump sum. Like many of our customers have done, you can use that lump sum payment to pay down your debt and begin working on establishing credit. Contact Peachtree Financial Solutions today to learn more about selling future payments and to receive your free quote.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.