Re-Establishing credit

If you've had some credit problems, or if you've never had any credit, you can start building a good credit history.

Suppose you haven't financed a car loan, a computer, or some other major purchase recently. You've been paying cash either because you wanted to, or had to.. How do you begin to establish credit?

First, consider applying for a credit card issued by a local store and use it responsibly. Ask if they report to a credit bureau. If they do - and if you pay your bills on time - you'll establish a good credit history.

Second, consider a secured credit card. It requires that you open and maintain a bank account or other asset account at a financial institution as security for your line of credit. Your credit line will be a percentage of your deposit, typically from 50 to 100 percent. Application and processing fees are not uncommon for secured credit cards. In addition, secured credit cards usually carry higher interest rates than traditional nonsecured cards.

Third, consider asking someone with an established credit history - perhaps a relative - to co-sign the account if you don't qualify for credit on your own. The co-signer promises to pay your debts if you don't. You'll want to repay any debt promptly so you can build a credit history and apply for credit in the future on your own.

A positive credit history is an asset, not only when you apply for a credit card, but also when you apply for a job or insurance, or when you want to finance a car or a home.

If Your Application Is Denied
If you're turned down for a card, ask why. It may be that you haven't been at your current address or job long enough. Or that your income doesn't meet the issuer's criteria. Different credit card companies have different standards. But if you are turned down by several companies, it may indicate that you are not ready for a credit card.
If you've been denied credit because of information supplied by a credit bureau, federal law requires the creditor to give you the name, address and telephone number of the bureau that supplied the information. If you contact that bureau within 60 days of receiving the denial, you are entitled to a free copy of your report. If your file contains accurate negative information, only time and good credit habits will restore your credit-worthiness. If you find an error in your report, you are entitled to have it investigated by the credit bureau and corrected at no charge.
You should dispute any inaccuracy in your report with the credit bureau and also with the company that furnished the information to the credit bureau.

When you do get that card …

• Once you get a card, sign it immediately so no one else can use it. Note that the accompanying papers have important information, such as customer service telephone numbers, in case your card is lost or stolen. File this information in a safe place.

• Call the card issuer to activate the card. Many issuers require this step to minimize fraud and to give you additional information.

• Keep your account information to yourself. Never give out your credit card number or expiration date over the phone unless you know who you're dealing with. A criminal can use this information to steal money from you, or even assume your credit identity.

• Keep copies of sales slips and compare charges when your bill arrives. Promptly report in writing any questionable charges to the card issuer.

• Don't lend your card to anyone, even to a friend. Your credit privilege and history are too precious to risk.

You're Responsible!
While a credit card makes it easy to buy something now and pay for it later, you can lose track of how much you've spent by the time the bill arrives if you're not careful. And if you don't pay your bill in full, you'll probably have to pay finance charges on the unpaid balance. What's more, if you continue to charge while carrying an outstanding balance, your debt can snowball. Before you know it, your minimum payment is only covering the interest. If you start having trouble repaying the debt, you could tarnish your credit report. And that can have a sizable impact on your life. A negative report can make it more difficult to finance a car or home, get insurance, and even get a job.

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