Ways to establish and build your credit.
Sure credit cards are an excellent way to establish and build credit, but surprise surprise there are also other ways to build your good credit (and of course damage it as well). As you begin the journey to build better credit, people will tell you to get one low interest credit card, use it a few times a year and always pay more then the minimum monthly balance.
But, did you know that these simple things can also establish and build credit:
-Cell Phone Bills- I was surprised to learn that I was approved without a co-signer on a student loan because my credit was good due to a contract with T-mobile with monthly bills that I paid on time and in full every month. So sign up for a cell phone contract, then do online bill pay for it. You’ll never miss a bill and in doing so you’ll begin to prove your responsible financial habits. (This most likely also works for any kind of contract based monthly bills in your own name- cable, internet, car payments)
-Student Loans- Having debt isn’t usually good, and having a ton of student loans isn’t a picnic either. However it IS better to have debt due to student loans, then debt due to credit card expenses that you couldn’t afford. Education is becoming as crucial as money and a place to live, and credit bureaus recognize that student loan debt is due to an educational investment in yourself and your future. Just make sure you use companies that will offer you good interest rates and fair terms which to pay back your loans. Companies like Sallie Mae are industry leaders and are more likely to cut you some slack if you have any hardships more-so then banks and credit card companies. Make interest payments sometimes while in school and don’t miss minimum payments after school either.
-Don’t apply to too many credit cards- Doing this shows credit companies that you may have a problem securing credit or a problem with spending too much. Even if your just testing the water, find a good credit card, apply to it and wait to see what happens.
I’m sure there are more, but these stand out in my mind. You might be asking what do I know about this? Well I will tell you flat out- you will be more likely to get a credit card, get an apartment lease, or get any other kind of credit based contract if you start with at least ONE of the non-traditional credit building methods above.
I have a T-mobile contract that I have had for almost 4 years, never have missed a single payment and I have student loans that I started taking out in 2002, by 2003 I was able to sign for them myself. In 2006 I was approved for apartment leases which due to timing I had to turn down, but it was a good feeling knowing I was able to get approved. Just last month I was approved for one of those new Chase Freedom credit cards…
After some research I realized that my good credit was established mainly by my cell phone contract payments and the fact that I applied to only one credit card in my life, not to mention keeping good records of my bank account activity and spending. Hope this advice helps and hope it gives some people hope when they think their in a credit less rut.