Establishing credit is all about demonstrating that you can handle your money in a responsible manner and in a better manner.

Understanding the Lender

Before you establish the credit for the first time, you must first understand the mindset of the lenders and what they are actually looking for, from a borrower and his credit. The problem lies in the fact that lenders don’t have your FICO score to look into if you have not established credit. In such situations lenders will have to examine various other facts that will help them in making a decision as to whether you pose a credit risk or not.

Some of the factors that lenders will look into are your bank accounts, employment history, residence history, the amount and nature of utilities that you have in your name, etc.

Banks are the First Port of Call

If you want to establish credit, then the first thing you must do is open a checking account at your local banks. If you can, you must also open a savings account. What this does is that it offers proof of your money management capabilities. Of course, herein, it is of primary importance that your active bank accounts have good standing. If you establish a relationship with a bank then the chances that you can get a loan of credit card through that bank, definitely go up. This relationship will definitely go a long way in establishing your credit.

Department Store Card

If you have trouble establishing credit then a store credit card might be a good idea. Generally, these cards are a bad idea as they lure you with up-front discounts but their continual interest rates are quite high. So go for these cards only if your local bank has denied you a credit card. However, also make sure that the department store card that you are going for reports to credit bureaus. Otherwise, it does not make any sense to go for these cards.

Secured Credit

If you have been rejected at all ends, and there is not other option, then you might think about going for secured credit. If you have secured credit card or loan it means that there is an asset that is linked to your account. So what you can do is, you can get a secured credit card with a limit of say $1000 by depositing $1000 in the bank as collateral. This means that if you are unable to make your credit card payments for some reason, then the banks will take your deposit.