How To Establish Credit For The First Time

Want to build your credit? Here are some thoughts on how to establish credit for the first time.

build credit, establish credit

How Do You Begin To Establish Credit?

I remember trying to establish credit in the U.S. five years ago when my wife and I returned from working in Mexico for 20 years. Our Social Security numbers returned the same message from every store where we tried to get some credit: “No data available”. So how does one begin to establish credit and finally obtain a credit card?

One of my colleagues at the school where I worked told me something that I had a hard time believing: “No worries, you’ll be swamped by credit cards offers 2 years from now. If you want a head start then build your credit by going to a store that will give it to you at a high interest rate. Buy something cheap that you need for the apartment.”

First Step: Buy Stuff From Places That Will Accept Credit. Start Small!

This story applies to most young people who work for the first time and need to establish credit. Of course, in my case, we were both over 50 and salespeople could not believe that we had no history of credit. We did, but it was so long ago that even the credit bureau had forgotten about it.

So we went to the local furniture store and bought a big queen mattress and the frame to hold it. The salesperson was used to people coming from Mexico, and as long as they could produce a paycheck stub, she was happy to charge outrageous interest rates. And so we went from store to store looking for a chance to open an account. Sam’s said no, J.C. Penney wouldn’t even consider it, same for Sears (I think the lady was trying not to laugh), and so instead, we turned to smaller stores. Slowly but surely, we built up our credit with little mom and pop stores till we were able to buy a house 3 years later with no money down.

Here’s a tip: start with a secured credit card to build your credit. Owning one will make it easier for you to apply for a regular credit card in the future. Here are some good options:

Second Step: Wait For Those Credit Offers and Manage Them Well

And lo and behold, after 2 years exactly, our mailbox began to fill with credit card offers. It seems that somebody had passed the word that we were to be trusted, up to a point. Of course, the rates were above 20% a year, so it was pretty imperative that we become choosy about how we’d take on additional credit. So we kept the amounts low on the first two cards.

This is the secret of building good credit: keep the balance low and pay on time every time. Some people believe erroneously that paying one day late is no big deal. A few credit cards offer you a grace period which may be up to 3 days, but most do not. So pay on time as much as possible.

Tips To Build Your Credit and Manage Your Credit Accounts

  1. Do not cancel credit cards once you pay them off, even if you think you won’t need them. That keeps your credit score up.
  2. Keep an eye on your credit score. Cheap or free credit scores can now be obtained online. myFICO has the best deals for FICO scores:

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    myFICO Score Watch Free 30 Day Trial Free for 30 Days then $99.95 a Year or $9.95 a Month
  3. Your liability will never be more than $50 if at all, but only if you report ID theft or misuse of your card within 24 hours. So don’t wait to report any issues to your credit card company if you suspect somebody is using your credit card number fraudulently.
  4. Establish limits on all your credit and debit cards. Tell the company to refuse payment on amounts above X dollars until you approve it. For example, somebody stole my debit card number in a restaurant and tried to buy something in excess of $1,000. Since I had established a limit of $300, my bank refused to pay, then called me to follow up.
  5. Never allow your credit or debit card out of your sight. Friends look at me funny when I stand up in the restaurant and accompany the waiter to make the payment. Hey, once burned…
  6. Check your credit card activity regularly on the Internet; don’t wait for the paper statement to arrive in the slow mail. By then, things may be too late!

12 thoughts on “How To Establish Credit For The First Time”

  1. Good tips. One more thing to consider is getting a secured credit card with your bank. This is what I did to establish credit, because all of the card offers I got wanted to charge annual fees. I don’t believe in having to pay someone to spend my own money, so I got a secure credit card with Bank of America and they actually paid me (interest on the deposit).

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  7. Thaidy Hernandez

    Hey im wondering about how we can start getting credit. Me and my boyfriend have gone everywhere trying to apply for credit cards but keep getting denied. When we go to open up a phone plan they hit us with a high deposit. We’ve even applied for credit cards online and get denied. We would just like more information on ways to build our credit. If there’s anything you can help us out with it’ll be appreciated.

    Thank you.

  8. good article! I have a student credit card with Wells Fargo and they allow you to set up text message alerts for activity. ANY time my credit card is used, I immediately get a text message letting me know it was used and where. It always catches me by surprise when I’m in a store and buy something and litterally, within seconds, I have been texted by Wells Fargo lol. I know that if my CC was ever lost/stolen and used, I would immediately be told via text message (= I also have an extra alert for if daily spending exceeds $500, just in case.

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