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| Establishing A Credit History |
Trying to establish a credit history can be very frustrating. No lender will grant you credit because you
have no credit history. But how are you supposed to get a credit history unless someone grants you credit?
No lender wants to be the first one to lend to a consumer if he does not have an established credit history.
This problem is common to the following situations:
- A young adult trying to obtain credit for the first time
- Elderly who have never used credit but now have a need
- Divorced or widowed individuals where all accounts were in the spouse's name
- A previous bankrupt after 7-10 years
- Individuals who have credit but not reported to the CRA's
Before you do anything, you need to get a copy of your credit report.
Even if you have never had credit, you still need to check your credit report. There may be negative information on
your credit report even if you never had previous credit.
In order to get you on your "credit feet", the following techniques can be used:
Easy to Obtain Credit Cards
Retail credit cards are the easiest types of credit cards to obtain. Try applying for a credit card at a local
department store. They may only start you with a small credit limit, but once you show that you can handle the
responsibility of a credit card, you are well on your way to establishing a good credit history. Be sure that
the department store reports their credit card to the CRA.
Secured Credit Cards
Obtaining a secured credit card is a good method of establishing a credit history. You will need to deposit
money into an account which the creditor uses as security. You will be paid interest on your deposit. The
credit limit established for your credit card will be a percentage (anywhere from 50% to 150%) of the amount of
money you have used as security. This method can also be used for individuals with poor credit who want to
establish a good credit history.
Small Secured Loan At Your Bank
By speaking to your bank, you may be able to set up a small secured loan for $500 to $1000. This works the
same as a secured credit card where you have to deposit money and the credit line will be a percentage of the
deposit. Make sure the loan will be reported to the CRA.
Getting Accounts Report to the CRA's
Couples who have or have had joint accounts may find that the account information is only being reported under
the primary account holder's name and not the supplementary account. Contacting the creditor and the CRA and
asking to have the account information reported under both names can correct this.
The Piggy Back Method
If you are not interested in obtaining credit, but only want to establish a credit history, this method is for
you. First you need a friend or family member, or even a few, who are willing to help you who have a credit
card and a good credit history. What you need to do is obtain a supplement credit card on their account.
This will make you an authorized user and the good account history will appear on your credit rating. You can
give the credit card you receive back to your friend or family member. After a few months, you can have your
name removed from the credit card. Even though you are no longer on the account, the good records on your
credit report will remain. This method allows you to "borrow" good credit history.
Getting a Co-Signor
If you are having trouble obtaining credit on your own, you can have a friend or family member co-sign credit
for you. Lenders may not extend you credit on your own, but may do so if someone agrees to back you up. Be
sure to make all of your payments on time, as the credit information will be reported to both your and your
co-signor's credit reports. Start with a small personal loan that can be paid off quickly. Once the loan
has been paid, try to apply for credit on your own.
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