If you do not have any credit established as yet or if you have a black mark on your credit report, use of credit cards in a responsible manner will help you establish or correct your important credit rating.
A long running joke about bankers is that they are happy to lend money to those who already have money. The same is true in the credit card industry. If you have good credit, you can be approved by any lender who issues credit accounts.
If you don’t have credit established in your name or if you have a bad mark on your credit file it I likely your application for a new card will be declined.
How can you build good credit if you can’t use credit? There are options for you to use that will lead to improved credit rating and the ability to qualify for credit in the future.
Department Store Credit Cards
For years consumers were advised to start building a credit rating with department store cards. The lending requirements were much lower than for credit cards that could be used in many locations.
The card could be used only at that particular store or chain of stores and the limits on new accounts were very low. The interest rates were quite a bit higher than for MasterCard or Visa.
Times have changed. Many of the most popular department stores still offer their branded credit accounts but those accounts are provide by credit clearinghouses such as GE MoneyBank that are finance companies or are issued by major banks such as Citi or Chase.
The most common department store cards such as J.C. Penney and Sears are not as easy to qualify for as they were some years ago.
However, if you are willing to accept a low limit on the account and can explain any problems in your credit file, you may still be able to qualify for a standard Sears card. Other possible credit accounts might be found through regional stores or even local, family owned stores.
Gas Company Cards
Some of the major fuel companies offer gas credit cards that can be used for gasoline or for purchases in the associated convenience store only.
The qualification requirements for these credit accounts are some of the lowest to be found. Gas companies are willing to take a chance on customers with limited credit or with less than perfect credit files but will quickly cancel those accounts if a late payment is made.
The larger gasoline companies report to the credit bureaus on a quarterly basis but some may only report if the account is delinquent. Before applying, ask if the accounts are reported to the three main credit agencies on a monthly or at least quarterly basis.
Secured Credit Cards
Almost anyone can qualify for a secured credit card account because you are required to deposit a specified amount of money into a savings account to guarantee payment of the charges made on the card.
With a secured credit card you can make purchases just as you can with a standard card. You will receive a monthly bill with a minimum payment required and as long as you pay the bill on time you will be building your credit.
Secured credit cards are not as widely available as they were a few years ago. They are not high profit items for lenders and thus have lost popularity. When you apply for a secured credit card, look closely at fees for establishing an account, annual fees and the interest rate that will be charged.
The fees and interest will not be comparable to a standard credit account as the secured cards are designed for those considered high risk financially. When you have no credit or bad credit you pay higher fees any time you borrow money.
If you have bad credit or have not established credit (still struggling with debt elimination) in your name there are popular credit cards that help build credit. It may seem easier to pay in cash but that is not a method that will help build your credit rating.