In the economic environment of today, although you may not need to use it, having good credit is vital to survival. It positions you as a fiscally responsible person and can help ensure that:
- You get better rates on your mortgage;
- You get better rates on your car loan;
- Your security deposit, if your utility company requires it at all, is as low as possible;
- Your potential landlord favors you over someone with a bad credit rating; and
- Your potential boss favours you over a candidate with a bad credit rating.
That being said, you should always keep in mind that the ability to obtain credit is a privilege not to be abused. It takes a long time to build up a good credit record but your reputation can be destroyed in a very short time. Do not borrow money that you cannot afford to repay.
How do you get your first credit card?
There is a slow way to get your first card fast. (And get a good credit rating)
And there is a quick way to get your first card fast. (You only need some collateral)
My hope is that if you are still young enough you will implement the slow way. If you are not – well keep on reading.
The slow way to get a credit card fast
- Open a debit or savings account (having an account demonstrates stability.)
- Become an authorized user on a parent’s, siblings or friend’s card (do not use this card and make sure that the primary account holder is financially responsible.)
- Get a student credit card.
- Consider an auto loan (the interest rate is usually higher but it is a simple way to build good credit.)
- Pay all accounts on time (set up debit orders to pay your bills or have a reminder system in place so that you’re never late with a payment. This includes utility bills, cellphone accounts and accounts at stores.)
- Keep your employment history clean (your work consistency and stability in holding onto jobs is very important.)
- Maintain a stable place of residence for as long as possible (this home address can even be that of your parents. Having a fixed home address greatly affects your credit rating.)
- Consider a loan from a peer to peer lending site (individuals who offer these loans compete with each other to offer you the lowest rates. Often lower
- than the bank’s rates. Ensure that these sites report to all the credit bureaus.)
- Get a copy of your free credit report every year and make sure there are no mistakes.
Building good credit is about proving financial responsibility and that you can reliably repay money you are trusted with. A single missed payment can negatively impact your credit score and take many years to disappear.
If all these things have been taken care of, getting your first card will be quick and painless. Just make sure you are able to pay the balances when they fall due or all of your planning and sacrifice will be for nothing.
The quick way to get a credit card fast
1. Pre-approved Cards
Companies which offer pre-approved cards get information from you through an electronic trail that you leave behind every time you apply for a card. If you have a good credit rating, you would be able to get a loan every time you apply and can prove that paying it back will not be a problem. You would also be able to get the benefits and privileges given to people with a good credit rating.
Everything is also visible online if you happen to have a bad rating. Potential lenders are also able to see that you have been disallowed credit and how often. This is a clear evidence that you are in possession of a bad credit rating. Only those with bad credit ratings get continuously rejected.
As such, they send you invitations so that you will be able to get hold of their pre-approved cards. If you take a good look at what they are offering, especially the conditions, you will see that they are asking higher interest rates. But, given your situation, this is may be a pretty good opportunity to try to bounce back.
2. Instant Approval Card
Search online for offers by banks and credit institutions for instant approval cards. These cards can be approved or denied in as little as 60 seconds.
Compare the benefits and obligations attached to these cards.
Apply for those that suit your needs and re-compare all those that are accepted. Most times, you will only need one card. It is not necessary to get all the cards for which you are approved.
3. Secured Card
With a secured card the credit card company will require a deposit held against the card’s use that will be used if you fail to become a payment processor pay the account. The deposited funds for a secured card are not used to pay for the goods and services as you use the credit card. This deposit will also determine the limit on your card.
Secured card providers report to the credit reporting agencies.
Pay all your bills on time and after six months of ‘good behavior’ you can consider applying to the same lender for an unsecured card. By this time, you will have established yourself as a responsible borrower.
If your application for an unsecured card is turned down, find out the reason. Not all lending institutions are the same. Some may require that you wait a little longer before applying for an unsecured card. Say anything from 12 to 24 months.
Do not re-apply every month. Unsuccessful applications reflect on your credit rating and can leave you with an unfavorable rating.
4. Pre Paid Card
A pre paid card is very similar to a secured card in that it also requires a deposit up front. However, unlike a secured card, the amount available from this deposit is reduced every time you make a purchase. In this way, your card actually functions as a debit card. The details of account behavior on a pre paid card are not normally released to credit bureaus. So, if you are trying to build up a good credit rating, this is not always the best option.
5. Retail Accounts
Some retailers issue cards for use only at its own stores, while gasoline companies offer cards for fuel purchases. Gas and retail cards are more likely to approve consumers with little to no credit history. Retailers and gasoline companies report activity to Experian, Equifax and TransUnion and are useful credit rating builders.
6. Joint Accounts
You can make use of a parent, a spouse, a close relative or a friend with good credit by opening a joint credit card account with that person. The bank approves the application based on the other person’s high credit rating, and the account gets reported in both cardholders’ credit files.
Use your card responsibly and always pay on time or you may damage your joint account holder’s excellent records. Make sure that your joint account holder does the same. You will want to get your own card eventually and a bad credit report will hurt the process.
7. Charge Cards
The providers include Diner’s Club and American Express.
Charge cards are similar to credit cards, but the difference is that the balance of a charge card must be repaid in full every month whereas a credit card balance can be carried over to the following month. Charge cards don’t have credit limits either, so you have to be sure to spend only what you can pay off at the end of the month.