The Consumer Financial Protection Bureau suggests establishing first-time credit with the following products:
If establishing credit for the first time seems like rocket science, it's okay. There are rocket scientists to help translate for us. We asked personal finance experts the best ways to help establish or re-build credit. Here’s what they said.
"A secured card is a great way to be introduced to, or build back, good credit. These cards are reduced in terms of their credit limit and you must have enough funds to pay the deposit up front.
Consider your goal with applying for this card before opening the account; know the ideal credit score you want to hit before moving on to an unsecured card and gaining the deposit back.
An unsecured credit card places more trust in you to make smart financial decisions with a larger credit limit and quick access to spending. Not having a deposit requirement means you do not need to save up anything in order to open this account. Be aware of annual fees and review APR to vet out the best card options available." — Jared Weitz, CEO and Founder, United Capital Source Inc.
“Luckily, new methods are being introduced such as Experian Boost which gives you credit for paying your utility bills and UltraFICO which looks at your bank account transactions and balances. These both give positive boosts to people with no credit or bad credit enabling them to start building their credit responsibly. These are both free which is much better than secured credit cards and secured loans as a first step.” — Ivan Chong, Founder, Lazy Finances
“It’s a good idea to research secured credit card offers before choosing one. Not only will the interest charged be high, but you’ll want to find out how much you’ll be charged for processing and application fees, as well as annual fees.” — Cara O'Neill, NOLO
“Asking a friend or family member to add you as an authorized user on [their] credit card is another method that works well if they have a long credit history.” — Ivan Chong, Founder, Lazy Finances
“Consider using a credit builder loan alongside a secured credit card, if you’re able — this will diversify your variety of credit accounts, which should help your credit scores.” — Sean Messier, Credit Industry Analyst, Credit Card Insider
Thanks to our experts for their helpful advice.
December 8th, 2020
April 8th, 2021
Sign up below to receive a monthly newsletter containing relevant news, resources and expert tips on Payday Loans and other products and services.