As some of you might remember, my first ever post here at This That and the MBA was about how I had no credit history. That’s right. I have a very unique problem here in the PF world. No student loans, no debt, no coming-back-from-the-edge-of-the-financial-cliff story. I literally had no credit history. I explained in the first post that this happened because I was afraid of credit cards and how I might misuse them. But, that led me to being (almost) 27 and having no credit history. Oops. I finally decided that I had a few options: open a credit card with a co-signer, take out a small loan with a cosigner, or apply for a secured credit card.
I decided to go the Secured Credit Card route.
I spent a lot of time deciding which route I would take. My husband has excellent credit and it would have been easy to add my name to one of his cards or have him cosign with me for a new card. But truthfully, I wanted to do this myself. I am a very independent person and did not like the idea of having to rely on anyone else to help build my credit! Besides, building my credit is more important to me than it is to anyone else so I wanted to take responsibility for it!
How the Secured Card Works
The bank I work for offers a Secured Credit Card so I decided to try them first. The minimum “deposit” was $300 so I added $200 to my brand new New (to Me) Car Fund, which brought the total in that account to $304 dollars, just enough to apply for the card. I was so relieved when it was approved on the first go! After a few days $300 was withdrawn from that account and my new credit card was mailed out to me. Now all I have to do is use it wisely!
What Exactly Using It Wisely Means
Unfortunately a lot of people still think you need to carry a balance and accrue interest on a credit card in order to build credit history. NOT TRUE! Do not fall prey to the interest mongers! I digress. My plan is to use my card for a few pre-planned expenses each month and then pay off the full balance before the due date. The awesome thing about the secured card is that it reports your payments to all three credit bureaus. The scary thing about the secured card is that it reports your payments (or lack thereof) to all three credit bureaus. This is not the card you want to miss a payment on. However, if you use it wisely and pay it off each month, it can be a really quick way to build up some credit history. Once the bank feels I’ve been responsible with the card for a long enough period of time, they will refund my $300 deposit and send me a “regular” Unsecured Credit Card.
Unfortunately, one credit card does not a credit history make. To have “good credit” you need to have had various types of credit extended to you over a period of time. It is good to have had loans, credit cards, and the like that you’ve handled well in the past. Creditors also look at things like the length of time you’ve had certain credit accounts, debt to income ratio, and how you’ve handled it all. So while this credit card is not the only thing I’ll need to have great credit, it will certainly enable me to have enough credit history to continue building my credit in other ways.
What have you done lately to build, improve, or maintain your credit?