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Building credit can be a challenge, and even more so when you have no credit to begin with. For people who are new to the credit game, it feels like a chicken-or-egg situation: you need credit to build your credit rating, but you can’t get credit without a good credit history. The good news is, there are a handful of ways you can get your credit history off on the right foot.
5 Co-Signed Cards and Loans
Finally, if you cannot get any type of credit on your own, you can always turn to a co-signer who has a good credit history, such as a parent or spouse. By either becoming an authorized user of the other person’s credit card, or having them co-sign for a loan—and accept the responsibility if you mess up—you can leverage their good name to start establishing your own.
4 Starter or Student Cards
One way to get an unsecured, major credit card is the “starter card,” often targeted at college students and others who are new to the credit game. These cards are very basic, with low limits and few perks, and often charge an annual fee. However, they are in other respects a regular credit card—and thus, both a good way to build credit and to learn how to use it.
3 Retail or Gas Cards
Another option is a card issued by a retailer or gas company. These cards may be easier to get than a regular credit card, but, of course, they’re only usable at the store or chain that issues them. They do usually offer benefits over cash at that store, but they also often have low credit limits and high interest rates—so use them judiciously.
2 Prepaid Credit Cards
Prepaid credit cards are similar to secured cards in that you pay a certain amount of money up front. However, these cards work more like gift cards—when you use them, that amount reduces the total available credit. Make sure the issuer reports the use of the card to a credit bureau, though, as many prepaid card issuers do not.
1 Secured Credit Cards
With a secured credit card, you give the credit card company a certain amount of money, such as $500, up front. That amount usually serves as your credit limit initially, and if you maintain a good payment history, the company often will upgrade the card to an unsecured one in time. At that point, you’ll get your initial collateral back—sometimes even with interest. Watch out for high annual fees, though, and make sure the issuer reports your card use to the major credit bureaus.