10 ways to build credit

Apr 5, 2000

So you’ve made it through high school, and you’re in college or just trying to make it in the real world. Or maybe you’re recently divorced and have no credit history in your own name. Or maybe you just grew up taught that all credit is evil. Whichever it is, building a credit history, a good credit history, is nearly as important and finding that right job in that right career or finding that right spouse. Being unsuccessful in any of these can be a regretful mistake.

Here are ten ways that nearly anyone who is either a full time student or has a full time job can begin to build his or her credit:

1 & 2 -- Gas Cards and Department Store Cards

You have to start somewhere, and gas stations and department stores generally have easier credit approval processes than major credit cards.

3 – Full time students and recent graduates and first time buyers – special offers

Major Credit Cards

Look around the bulletin boards and school paper at your college or university. Legitimate issuers such as Citibank, Chase, and the Associates all offer special student programs which cater to students and use a different set of approval guidelines.

Car loans

All of the American auto manufacturers typically offer first time buyer or recent graduate special financing packages; while the interest rate may be somewhat higher, often the deals include a special up-front rebate as well.

4 – Rent to Own

While rent to own shops are notorious for high prices and high finance rates, you can often get a great deal on pre-owned merchandise, and can often finance it “same as cash” (no interest) if paid within a set number of months. If you ask, most R-T-O’s will report your good credit to the credit agency they use for you. In general, R-T-O credit is much easier to attain than even regular department stores, because R-T-O’s maintain ownership until the item is paid in full and will not hesitate to repossess items not paid for as agreed.

5 – Purchase a vehicle with a large percentage down

Even if you have the cash to buy your new or used car outright, financing a small portion is an easy way to get credit; because you will have a large percentage in the vehicle, the risk to the financing company is minimized. If the car is repossessed, the finance company stands to recover their full contract value. Therefore approval is much easier to obtain.

Also, consider a used car, financing is often easier to obtain.

6 – Purchase a CD, and take out a loan from the same bank using the CD as collateral

Because the bank has no risk, the terms of the loan should be very reasonable. (This is also a good tip for someone who has a CD and has a temporary cash flow problem, but doesn’t want to pay the early withdrawal penalty). Make your payments as agreed. DO NOT PAY THE LOAN OFF EARLY.

7 – A joint account

Though this isn’t as valuable as an account in your name (nearly always the “joint account” designation will appear on your credit report) it is still positive info if payments are made as agreed. Note: You can even let your friend or parent make the payments so that they can sleep at night, knowing their credit isn’t being soiled.

8 – A secured card

These are nearly approved 100% of the time; just make sure you use a reputable bank or credit union (yours if possible). I highly DO NOT recommend Capital One. To see why, visit this epinion: http://cycleodyssey.epinions.com/finc-review-E84-E5DF9C3-38B6152E-prod7

I’ve had good luck with Providian, but I’ve heard many horror stories about them as well. Proceed with caution with a secured card as your last resort. Again, use your own bank or credit union if possible.

9 – Do not pay off 100% of your balance every month

While this is a great practice if you have credit, it doesn’t always get you the positive reporting history you might hope for. Instead:

1. Take that new department store credit card or student credit card (or secured card) and treat yourself to that new pair of jeans you need, some underwear, and socks (an example – the key is, purchase practical things you need anyway)

2. Pay off approximately a third of the balance each month until it is paid for in full

3. Do not put anything else on this card (the one carrying your balance) until after 3 months, when it is paid off.

4. After the last payment is posted, repeat as necessary steps 1-4 (sounds like a shampoo bottle, doesn’t it)

10 – If your positive info isn’t showing up on your credit report, actively get it put there!

Many creditors, while quick to report negative credit, do not report positive credit unless asked. If the credit department doesn’t follow through with your request to report this info, you can request that your local credit agency research your positive credit (I believe there is a fee for this service).

However, usually if you explain to your creditors that:

1. You are trying to build a credit history, and
2. If they won’t help you out by reporting your good credit, then
3. You will take your business elsewhere

They will be happy to override any non-reporting policy they have and help you out.


Most of these steps are painless, but if you follow as many as appropriate, live within your means, and make your payments as agreed, you will build a healthy credit file and contribute to a happier life.

Good Luck

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