How to establish new credit

Establishing credit can be confusing. Most people don’t know where to start. If you do not have credit history it could be difficult to get a bank or retailer to approve you for a credit card. Lenders are wary because it’s difficult to verify that you are creditworthy. So what do you do?

Secured credit cards are one of the easiest ways to start to establish credit. There are countless of lenders who offer these cards. They essentially allow you to buy credit. Usually there is a minimum deposit that you are required to make and the credit limit on the card is usually equal to your deposit. You then make purchases and payments just like any other credit card. The issuing bank reports your payment record to the credit bureaus, helping you to build a credit file.

Another option is to have your parent or spouse add you as an authorized user on their credit card. That allows you to have a card and start building a credit history, based on your parents’ or spouses’ management of the account. Although your history as an authorized user doesn’t count as much toward your FICO score as having a card in your own name it is a good start to establishing credit history.

Secured loans are also an option. They work pretty much the same as secured credit cards. Lenders will have you either open a certificate of deposit (CD) or they can place a hold on funds in your checking account in the amount equal to the loan. You will pay monthly payments with interest. After the loan is paid the lender will release the hold on your funds or allow you to cash in your CD. Just like traditional loans your payment record is reported to the credit bureaus.

We can help you!

Here at Credit Restoration of Texas we can refer you to trustworthy lenders and creditors that will help you build up a favorable credit score. Contact us at (210) 248-9061 or simply complete our contact form to learn more.