You need a credit card. Yet, because of some jack-booted thug at the IRS or
some just plain bad luck, your credit history stinks. And nobody will let extend you
credit. You see great deals on the Internet, but you can't enjoy the convenience and
security of online ordering. What can you do?
Here's one way to get back in the good graces of lenders:
1. Get a
credit card. Any one will do, no matter what rate it charges. Don't apply for
every credit card possible. Apply for one every 3 weeks or so until you get
accepted. Then stop applying.
2. Use that card to make one small purchase a month--something you know you can pay off.
3. Pay the small balance in full each month.
3. After 3 months, add a basic purchase, like gasoline--you are going to buy gas anyhow.
4. Continue to pay the balance off.
5. After 3 more months, add another basic purchase, like groceries.
6. This time, keep a running tab of what you purchase, making sure to set aside the funds
at each payday.
7. Continue to pay the card in full.
After you have done this without any lapses, consider financing some other necessary
purchase, but a large one. If you buy a car, make sure you set your spending limit before
you talk to a salesperson--otherwise, you will end up ruining your credit again.
What you accomplish here is you establish a credit track
record without adding new debt. Now you are a bit more attractive to potential
Having problems getting that first credit card? If you've
applied to four and been rejected, the answer is yes. Don't keep applying,
because too many applications will count against you. The answer is to obtain a
secured credit card. It works much like a debit card, because you must first
have the funds on hand. You deposit an amount equal to your credit limit, or the
amount you deposit IS your credit limit.
To make things simple, go to the bank where you have your
checking account and get this card from them. Again, the interest rate and other
terms do not matter. You are going to make only small purchases to establish a
credit pattern. What will matter with this card is that you aren't required to
maintain a balance of any size on deposit. If your bank wants a big deposit,
then look elsewhere for this card.
Another thing you want to make sure of before you get this
card is that you will get your deposit back after X time. If you can't ever get
it back, you are stuck with this card and never getting back that deposit. It's
a permanent loss that way, and it's not acceptable.
Every time you buy something with this card, make an
Outlook appointment (or whatever calendaring system you use) to pay that about
that amount the following week. Preferably with online transfer. For example,
have an appointment every Friday to pay for whatever you've bought. Transfer
that amount to the card. This way, you will pay off your balance in full. Even
with a deposit, this matters. And you'll develop the habit of paying on a
It's critical that you pay down the balance weekly, not
monthly. This is easier to manage from a cash flow perspective, and the pattern
of regular payments gives you a good mark on your payment record. The credit
card company will report your excellent payment history to the
credit bureaus and that will improve your
Once you get in the
groove of using this card, apply for a store credit card at one store where
you shop frequently. Use that card the same way, paying off purchases
weekly. These cards, because they have to be used in a particular store or
store chain, tend to be easy to obtain. If you can't get this card after
applying to three stores, then wait six months and try again.
After you get six months
of payment history with a store card, obtain a second one. After you have six
months of payment history with the second one, then it's safe to try obtaining
an unsecured credit card.
Once you get that card,
follow the same weekly payment discipline. After you have done this for six
months, then you can probably qualify for a rewards card and get cash back or
credit back on your purchases.
At this point, you have several cards. Cancel the one that
is least favorable to you. Don't apply for another card for six months. When you
eventually do apply, you'll find your credit score has greatly improved. That
is, if you have kept current with other obligations such as utlities, taxes, car
Get your free copy of our consumer
credit guide here. No strings attached.