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A credit history is extremely essential for every consumer. Credit card lenders, banks, insurance companies and even prospective employers take a look at the credit history of an individual before determining their creditworthiness. This is the reason why it is imperative that one must try and build on their credit history. Here are some pragmatic ways available for those with no credit history, to improve it and get to a state where they can prove their creditworthiness to lenders, especially credit card issuers and insurance companies. Apart from credit cards with high interests or security deposits, even student credit cards are available for those in college with no income of their own. Such cases might need you to have a co-signor on the credit card.
Credit cards with security deposits
There are many credit card issuers who offer the option of security deposit as an alternative to no credit history. No credit history means lack of credibility, thereby translating to a higher risk for the credit card issuer. Hence in those cases, the card holder is expected to pay a security deposit upfront and the credit limit available on the credit card would be equal to or a percentage of the security deposit. If the card holder doesn’t repay the dues on time, then the card issuer is free to claim the security deposit from the customer account. If the customer needs to use the card, then he or she will have to replenish the security deposit. However, a card holder can leave the security deposit as is and make regular bill payments, thereby improving their credit history significantly. Eventually, the card holder can even negotiate for a no security deposit, credit card, which is a logical progression, considering their improving credit score.
Prepaid credit cards
Some gas stations as well as retail chains sell prepaid credit cards and report it to the credit bureaus. Those with no credit history can certainly start with such cards and manage all their expenses through those prepaid cards. Over a period, their spending can be tracked and audited, and hence their credit score improves too. However, card holders must be careful while choosing prepaid credit cards. Some of them charge obnoxious penalties and processing fees thereby reducing the limit on the prepaid card to a great extent. Such prepaid cards don’t prove to be a useful commodity and could burn a hole in your pocket.
Bad credit, credit cards
Credit cards are offered by some lenders for those customers with a bad credit history. However, it goes without saying that such credit cards usually have numerous pitfalls. The card holder needs to be extremely careful as the interest rates on these credit cards are very high and so are the penalties. So the best way to use those cards is to make only necessary expenses and pay the bills on time. That way you will have a credit history to show for over a period of time, giving you a better chance to switch to a lower interest credit card in the longer run.
