Your First Credit Card

For a great number of people, establishing good credit seems to be almost impossible. In reality, there are a wide variety of methods to be used in order to establish credit and begin building up your credit score. Which method to be used depends on the situation of the individual in question. No matter whom you are, building up your credit is important for establishing good debts and being able to properly manage them in order to build up your financial portfolio.

Co-Signer

Most people have credit. Whether it is good or bad depends on a variety of factors which are not always in the control of the individual in question. On rare instances however, someone will not have any credit at all. In these cases, no news really is good news. It is frequently easier for someone with no credit to get a credit card than it is for someone with a history of bad credit.

The reason for this is that the person with no credit may or may not be a good risk but there is not sufficient evidence to decide accurately either way. Whereas the person with bad credit has already proven that they are a poor risk and can not be easily trusted. Therefore, the credit card companies and financial institutions have to find a way to insure their investment in order to determine whether or not somebody with no credit history will be a good risk or a poor risk.

The most common solution that they have in place is that of a co-signer. Perhaps this is most frequently seen in instances where people are purchasing a new car for the first time. Even people with good credit histories can be risks if they have never had any credit for a substantial amount of money.

The co-signer is another person who has already established a good credit history and has proven themselves reliable to the lending institutions. This person will co-sign on the loan or the credit application as a guarantor that the amount lent will be paid. The person with little or no credit can then use this situation to further enhance their own credit. If for any reason they do not pay, the co-signer is responsible for the debts.

In this manner, it is possible for credit card companies and other financial institutions to help people in establishing a good credit rating while eliminating almost any and all chances that they will lose any money that they have invested in the individual. While this method is not always assured to get the desired credit, it is one very common way for young people to begin establishing credit, get used to working with credit cards and learning how to properly manage their debts.

Bank Cards

Many people do not have credit cards simply because they have never applied for one. While some of these people may believe that this alleviates them from having any credit at all, this could not be any further from the truth. Quite often, they will have good credit and not even know it. While they may not see the need for a credit card at one particular point in their life, it is not to say that they are credit-free or that they will not come in line for a credit card simply in the course of their other financial routines.

Many banks now use what are known as debit cards. These cards function in much the same way as credit cards except that they are limited to the amount of money that the individual has in that particular bank account. The vast majority of these debit cards are controlled by the bank and do not make reports of expenditures to any of the major credit reporting agencies.

However, some of these bank cards are in fact, tied to the credit reporting agencies and will also function as either a credit or a debit card. That is to say, the card can be used as a debit card and the money will be drawn directly out of the bank account associated with that card.

For the purposes of credit, that same card can be used and the money is paid out at the end of the month. While the money may be directly withdrawn from the bank it may also be that the customer or cardholder will receive a bill at the end of every month. In those instances, it is necessary for the cardholder to treat this just as they would any other bill and make their payments on schedule or risk losing their good credit history.

Secured Credit Cards

Some people have already effectively destroyed their good credit rating. Even those that have made the sincere and complete effort in order to pay off each and every one of their bills, still has the bad credit history hanging on to their tails and keeping them from financially, getting where they need to be in life.

So why did they go to the effort to pay off all of those bills if the bad credit rating is still going to haunt them? The simple answer is that paying off those bills will get most people a second chance. As long as the privileges and responsibilities are not mismanaged or mishandled a second time, rebuilding the credit will be the easy part of their battle. However, they are going to need a starting point in order to rebuild their financial situation.

For these people, whether they are renting their own home or buying one or even have a home that is already paid off, they are still getting marks and reports on their credit. Utilities are marked as credits since the services are provided before payment is made due. It is almost impossible for anyone to live a truly credit free life.

However, even if they have paid off all of their overdue accounts, never been late on their rent and never even late on their utilities, that will not be enough in and of itself, to reestablish their good credit rating. It certainly is not going to hurt them but it will not get them very far when it comes time to try and finance a car, a home or a business.

So how do they go about reestablishing actual credit? What does it take to get back on the road to a viable plan for establishing and managing debt so that it will reflect well on the individual and allow them to make their way back into the financial world of success? For many people, the answer is by using secured credit cards.

It is very important to pay attention when applying for secured cards. Most of these financial institutions will require the individual to establish a bank account in the bank of their choice in order to secure the credit card and the balance of the credit extended to the cardholder. While this may seem like a great deal, not all credit cards or credit card companies are created equal.

If all you need is a credit card for limited use, than any of them may do what you need them to but is that really all you want it for? If you are going to have the card anyhow, shouldn’t you be able to get the full benefit of having a credit card and not just have some relatively useless piece of plastic? Choose wisely or that is all that you will be getting for your investment here.

A great many companies offer just such cards to high-risk individuals. As often as not, they will charge as large an interest charge as they are able to without actually violating usury laws. The interest charges must be paid regardless of whether there is any remaining balance or not in most cases.

While that may seem like a raw deal, it actually gets worse as well. Not only do they charge exorbitant interest rates, but many of them do not even make reports of your credit to the major credit reporting agencies. While the interest fees may be unavoidable at least to a certain extent, if you are going to have a credit card, you should at the very least be establishing your credit as well.