Building Credit Is An Important Part Of Choosing Your First Credit Card
With credit, no credit history is actually worse than bad credit. Banks, loan companies and any company that would need to your ability to repay loans or to pay bills on time. Bad credit can be repaired easily enough over time, but with no credit what so ever, your between a rock and a hard place. There are however options for those to build their credit up that are designed for those with no credit.
If you are under 21 years of age and interested in building credit, a law signed in 2009 could hamper this for for you. The law was designed to limit predatory loan and credit companies from targeting young people who do not understand credit, borrowing and loans. The law requires anyone under the age of 21 to provide proof of income and ability to repay any loans, or to have an adult co-sign the loan or credit card. Since the law was enacted, mew credit accounts opened by those under the age of 21 dropped by 17 percent.
One easy way to start building up some credit history is the use of a prepaid credit card. You will need $300.00 to start one of these accounts. They take your $300.00 and deposit like a savings account, as collateral. You earn a small amount of interest on it while they hold it, for a period of either 12 months or 18 months depending on the card. Once the 12 to 18 months is up they will refund you the deposit with interest and your prepaid card will be upgraded to a regular credit card provided that you paid off the balance and were not late with too many payments. You must however verify that the card you are applying for does indeed get reported to the credit reporting agencies. Capital One’s reloadable prepaid MasterCard for example has no fees, but it does not report your credit to the credit reporting agencies, so it is totally useless for building credit. Other cards such as the Bancorp Bank Purple Diamond Prepaid Visa RushCard do however report your credit usage and helps you to establish credit.
You can also apply to receive your first credit card with the help of a co-signer. The co-signer signs your applications and agrees to be responsible should you default on payments. The creditor now can go after two people should the primary default on repayment. The downside to this is if you default you will damage your co-signers credit, and they will not be to happy with you. You can use a co-signed card sparingly and after a period of 18 months to 3 years reapply on your own without the need of a co-signer. Once you get your first card without a co-signer your credit will make a decent jump score wise.
There are also these credit cards for people with no credit history. remember with all of these card offers, that Federal laws require that individuals under 21 must be able to prove they have the independent ability to repay debt or have a co-signer over the age of 21 who agrees to accept joint liability for the account.
Capital One® Platinum Credit Card
This card has no introductory APR or APR period, however it does feature no annual fee for the first year. Your credit limit will be on the low side, but it will increase once you have paid off 5 monthly payments on time. You can pick your own monthly payment date as well, which helps if your in school or need to set payments up for a certain date of the month. There is also fraud coverage with this card if your card is lost or stolen.
Midnight Prepaid Visa® RushCard
This card allows access to over 23,000 fee free ATMs coast to coast, allowing you get withdraw cash or check your balance for free. You can also do card to card transfers to receive money from friends or family with this card. There is an annual fee which varies. This card like most starter credit cards has no introductory APR. You must also deposit money with the creditor and whatever this amount is will be your credit limit. You will get the deposit back after a set period of time and your card will upgrade to a regular credit card at that point.
Discover it® chrome for Students
Unlike the above cards, this card has a zero percent introductory APR. The regular APR varies between 12.99% to 21.99% variable. There is no annual fee nor an over the limit fee. If you plan to travel as a college student, there is no No foreign transaction fee. No late fee on your first late payment. They give you Free a FICO credit score rating online as well as on your monthly statement so you can track your score’s progress, which is a great boon for those just starting to build their credit score up. Being able to track how well your score improves every month will better help for you to plan your credit future. Customer service with this credit card is U.S. based, and customer service is available anytime, day or night.
Once you get your first credit card, use it wisely. Do not miss any payments and do not make late payments. If you manage your first credit card well, you will be on your way to a good credit future.
This article was written by Steven Moore, who has been covering consumer finance and the credit card markets since 2006. You can learn more and connect at his Google+ page.