05/10/2016

How to Establish Credit?

how to establish credit

When you’re first starting out in the world of credit, it isn’t just a confusing process, it can also be frustrating. For many creditors, no credit is just as bad as having bad credit, and unfortunately, the only way to establish credit is to somehow get approved while you have a low credit rating. This places young adults and college students in the difficult position of needing to establish credit, but not having a credit history to get credit. Usually, there isn’t a quick fix, but if you happen to be in a situation, whether you are looking for a credit card for a first-time card user, with bad credit and working on re-establishing credit, or even attempting to establish business credit, you do have options for establishing credit faster.

Establishing New Credit

Once you turn 18, you might want to take the next step into adulthood by getting a credit card. If you don’t yet have any credit established, you will need to find options designed for first-time users. However, in order to get approved for a credit card, you not only need to be, at least, 18 years of age, you must also provide proof of income or assets to show you can make the payments on the card. Otherwise, you may need a co-signer or authorized user to qualify. If you have a job, even if it’s a part-time job, you could qualify for one of the following student credit cards.

read card review Apply Now
at issuer’s secured site
no credit
intro purchase APR 0% for 12 monthsregular APR13.24 - 23.24% (V)
intro BT APR 0% for 12 months 3% min $10
rewards 1-3% per $1 +$100 intro bonus
  • earn 3% on grocery store purchases
  • earn 2% on gas
  • quarterly limit of $1,500 apply on gas and groceries combined purchases
  • get $100 after spending $500 on the card in the first 3 months

no annual fee

2-3% cash back on gas and groceries

read review

BankAmericard Credit Card for Students has no annual fee and a low-interest rate for first-time card users. As a new cardholder, you also get a 0% introductory APR on balance transfers made within the first 60 days of opening the account, for 18 months. After that, a variable APR of 11.24% to 21.24%, will apply.

Advantages of the BankAmericard Credit Card for Students

  • No annual fee
  • Possibility of a low interest rate
  • 0% intro APR for balance transfers

Disadvantages of the BankAmericard Credit Card for Students

  • No rewards or extra perks

read card review Apply Now
at issuer’s secured site
no credit
intro purchase APR 0% for 6 monthsregular APR12.99 - 21.99% (V)
intro BT APR 10.99% for 6 months 3% BT fee
rewards 1 or 5% 
  • earn 5% cashback on rotating quarterly categories up to $1,500 quarterly limit in purchases
  • 1% cashback on all purchases
  • double cashback for first year
  • $20 cashback annual  bonus if your GPA is 3.0 or greater

 

no annual fee

no credit needed

5% cashback on changing categories

double first year cashback

read review

Discover IT for Students awards students 5% cash back in rotating quarterly categories and 1% cash back on all other purchases. There is also no annual fee and new cardholders get a 0% intro APR on purchases for 6 months and then a variable APR of 13.24% to 22.24% will apply. You can also earn $20 cash back each year that your GPA is 3.0 or higher for the next 5 years. Further, Discover currently matches all the cash back you earn at the end of your first year as a new cardholder.

Advantages of the Discover it for Students Card

  • No annual fee
  • Up to 5% cash back
  • $20 cash back for good grades
  • Match all cash back after your first year

Disadvantages of the Discover it for Students Card

  • Categories change each quarter

New Credit for non-Students

Most of the credit cards that are marketed for people with fair credit, can be approved for people with no credit history as well. One of the good examples is the Barclaycard Rewards card.

read card review Apply Now
at issuer’s secured site
fair credit
intro purchase APR no intro offerregular APR25.24% Variable
intro BT APR no intro offer BT fee 3% min $5
rewards 1-2 points/$1 
  • 2x points on groceries, gas, utilities (excluding Target and Walmart®)
  • 1 point on all other purchases
  • redeem points towards your statement balance to offset purchases

2X points on gas, utility and grocery store (excluding Target® and Walmart®) purchases. 1x points on all other purchases

No annual fee

Points don't expire as long as account is open, active and in good standing

Redeem points for deposits to a U.S. checking or savings account, statement credits or gift cards, starting at 1,000 points for $10

No limit on the number of points you can earn or redeem

Free online access to FICO® Credit Score lets you keep an eye on your credit and get alerts when we learn that your score has changed

Use your card with confidence, $0 Fraud Liability protection means you're not responsible for unauthorized charges you report to us

Chip card technology, so paying for your purchases is more secure at chip-card terminals in the U.S. and abroad

read review

Another bank that has a long history of offering a credit to people with no credit is Capital One. Try QuickSilverOne card - it has no annual fee and provides a cash back for your spending.

 

read card review Apply Now
at issuer’s secured site
fair credit
no credit
intro purchase APR 0% for 9 monthsregular APR23.24 - 23.24% (V)
intro BT APR 0% for 9 months no BT fee
rewards 1.5% on all purchases 

earn 1.5% on all purchases with no cap and limitations

$39 annual fee

good for average credit\limited credit

1.5% cash back

read review

Re-establish Credit After Bad Credit

Another instance where you may have to figure out how to establish credit is if you have bad credit due to credit problems in the past. It’s easy once you get credit to make mistakes that end up putting your credit score in the poor to bad credit range. In this instance, you’ll need to establish credit – but you’ll have the challenges that come with those past mistakes. If you need to re-establish credit after bad credit, you can recover by keeping the following tips for repairing credit in mind.

  • Make all payments on time. You may need to set up automatic payments or reminders to ensure you make your payments on time. In order to reestablish your credit, you’ll need to make every payment on time, and make sure you don’t miss any payments.
  • Use Your New Credit Wisely. One of the best ways to reestablish credit is to use it only for necessities or to make purchases you would be making anyway. For example, if you reserve your credit cards for gas or groceries, you aren’t adding extra debt to your budget and it’s easier to keep your debt under control.
  • Get a secured credit card. One of the best ways to begin repairing bad credit is with a secured credit card. This type of card requires a security deposit that is held by the card issuer while the account is open. In the meantime, you get a credit card that you can use just like you would any other credit card, typically with a credit limit in the amount of your deposit. As you use your card and make your payments, your account activity is reported to the credit bureaus, which can help establish a better credit score.

Some of the secured cards we recommend for establishing credit when you have bad credit include the following:

read card review Apply Now
at issuer’s secured site
bad credit
intro purchase APR no intro offerregular APR23.24% (V)
intro BT APR 23.24% 3% BT fee $5 min
rewards 1x-2x miles per dollar +5,000 bonus
  • 2x miles on gas and groceries
  • 1x miles on all other purchases
  • get 5,000 bonus on first card use

 

$25 annual fee

$0 first-year fee

reports to credit agencies

24 days grace period

unsecured card offer after 12 months

read review

U.S. Bank offers a few different credit cards for rebuilding credit. One of these cards is the AeroMexico Visa Secured Card, which stands out above others because you not only get a chance to repair bad credit, but you also can earn rewards when you use the card. This card requires a security deposit of, at least, $300 and has an annual fee of $25 per year that is waived the first year. The APR for purchases and balance transfers is 22.99%.

Advantages of AeroMexico Visa Secured Card

  • Double miles for gas and groceries
  • Deposit earns interest
  • Extra travel perks

Disadvantages of AeroMexico Visa Secured Card

  • High APR

read card review Apply Now
at issuer’s secured site
bad credit
no credit
intro purchase APR N.A.regular APR13.99% (V)

$39 annual fee

reports to major credit bureaus

25 days grace period

read review

There are a few different secured primor credit cards designed for helping consumers rebuild credit. The primor Secured Visa Gold card requires a security deposit of, at least, $200, which is held in an interest-bearing bank account. The annual fee is $49, and the APR for purchases is a fixed APR of 9.99%.

Advantages of primor Secured Visa Gold

  • Deposit earns interest
  • Lowest APR for a secured card

Disadvantages of primor Secured Visa Gold

  • High annual fee

Establishing Business Credit

Another area where you might have to establish credit is if you are a new business owner and haven’t yet established credit for your business. Even if your personal credit is good, you need a separate credit history for your business. Tips for establishing business credit include the following:

  • Get a federal tax identification number (EIN)
  • Open a bank account for your business
  • Establish credit with smaller vendors or suppliers
  • Open a credit file with the credit bureaus
  • Get a business credit card

Business credit cards usually have higher credit limits. One of the best cards for a new business is a Capital One Spark card

read card review Apply Now
at issuer’s secured site
fair credit
intro purchase APR no intro offerregular APR23.24 - 23.24% (V)
intro BT APR no intro offer no BT fee
rewards 1%  

no annual fee

good card for average credit

1% cash back on all purchases

read review

This card offers  $10k initial credit limit, 1% cash back and no annual fee. Capital Spark Classic is available for people with an average credit.

Establishing credit for your business can be just as difficult as a consumer who is just starting out with no credit. However, there are business credit cards available that are designed to help you establish a credit rating for your business. Check out our recommendations for business credit cards here.

 

Photo by Nick White



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