Most established banks, finance companies and other major card issuers will refuse to open an account for you and issue you a credit card until or unless you provide them with evidence that you will reliably make timely payments on your credit cards.
Your immediate objective should be to begin establishing a positive credit history.
The overall strategy towards achieving this objective is to first apply for credit cards that require no credit history for successful application and issuance.
You will then build up your credit history with these cards, making sure you pay on time, and in full, always.
Suggested Credit Cards
"Student" Cards
These are normally issued to those with little or no credit history.
Secured Cards
A good issuer of these type of cards is Bank of America. You will be able to get a credit card for as little $300. The credit limit on that card is then set to the amount of the deposit. The other advantages of the Bank of America card are:
- Low annual fee ($29).
- Bank of America has a history of converting deserving secured card accounts to unsecured, often in as little as 6 months. They are also quite willing to steadily increase credit limits thereafter.
Be an Authorized User (AU)
This strategy calls for having someone to designate you as an authorized user on their credit card. This shows trust on their part that you have integrity and are capable and willing to maintain payments. It's best to have a friend or relative grant you this favor, and the longer their account has been active (and in good standing), the better the potential score the issuers may assign in evaluating your credit qualifications.
Cards from Gas Stations and Department Stores
These are usually easier to obtain as their use is extremely limited, and thus can be issued to those with minimal credit history. For instance, many people have reported high success rates with Target.
The Hooters restaurant chain also sponsors a credit card, and have been known to be quite open to applicants with poor history. It's possible that they are open to those with no history at all. Here's a reassuring-looking graphic I captured from their site:
The Hooters card also features a full points rewards program and a year's subscription to their magazine.
Macy's
Pros:
- They are very good at increasing your credit limit later on.
- If you're approved for Macy's, there is a high chance that you will get approved for Bloomingdale's as well.
The one disadvantage is that you might only get a $100 limit to start off with, but that shouldn't matter as you're only looking to begin building a positive credit history now.
Join a Credit Union
Ask around for the kinds of credit unions out there. You might be eligible to join one that is associated with your alma mater, community group or other affiliations.
They are initially strict about giving credit (due to the fact that credit unions are owned and controlled by their members, thus the members are bearing the financial risk), but they tend to be one of the more reliable sources of credit to established members.
At the very minimum, be sure to apply for a checking account upon joining.
Establishing a good relationship with a credit union is definitely a smart financial move.
Conclusion
If you're starting to build credit, keep any credit line for which you've applied and are approved, as long as there is no card fee. Every line that you establish and hold on to will go towards building your overall credit history, and this is invaluable when you have virtually none to begin with.
If you get a line of credit from established institutions such as Citi or Bank of America, it would be worth to keep maintaining those lines as an investment as they're known to reliably increase credit limits.
Only apply for credit lines which will truly benefit you, and for which there is a realistic prospect of being approved.
Once your credit history starts improving, you'll want to be selective about future applications. It means that you might have to wait to apply for cards which have a reputation for requiring strong credit scores until you're reasonably confident that your scores match their criteria for approval. Two cards which are known for having strict criteria are Discover (700+ FICO) and Sears (above 680).
You might like to start with Bank of America and Chase, two institutions which have been willing to extend credit to individuals attempting to rebuild their credit after a period of delinquencies.
Good luck!
[via cardratings.com]