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MSN
Money
By Liz Pulliam
(Continued
from page 1)
You
still have to exercise some caution, though. Look for a card
with a low or nonexistent annual fee and low interest rates.
For now, just get one: Opening a slew of credit accounts in
a short period of time can make you look like a risky customer.
Apply for a secured credit card
If
you can't get a regular credit card, apply for the secured
version. These require you to deposit money with a lender;
your credit limit is usually equal to the deposit.
You'll
want to screen your card issuer carefully. To be frank, there
are a lot of bad guys in this particular niche of the credit
world. Some charge outrageous application or annual fees and
punitively high interest rates.
Your
credit union, if you have one, is a good place to start looking
for a secured card. You can also check Bankrate.com's list
of secured credit card issuers.
Ideally,
the card you pick would:
- Have
no application fee and a low annual fee
- Convert
to a regular, unsecured credit card after 12 to 18 months
of on-time payments
- Be
reported to all three credit bureaus.
If the issuer doesn't report to the credit bureaus, the card
won't help build your credit history.
Get
a finance company card
Gas
companies and department stores that issue charge cards typically
use finance companies, rather than major banks, to handle
the transactions. These cards don't do as much for your credit
score as a bank card (Visa, MasterCard, Discover, etc.), but
they're usually easier to get.
Again,
don't go overboard. One or two of these cards is enough. If
you get many more, you may find that later in your life these
accounts could prevent you from getting the highest possible
credit score. That's not a reason to avoid them completely,
because right now they'll do you some good. Just don't apply
for half a dozen.
Get
an installment loan
To
get the best credit score, you need a mix of different credit
types including revolving accounts (credit cards, lines of
credit) and installment accounts (auto loans, personal loans,
mortgages).
Once
you've had and used plastic responsibly for a year or so,
consider applying for a small installment loan from your credit
union or bank. Keeping the duration short -- no more than
a year or two -- will help you build credit while limiting
the amount of interest you pay.
Use
revolving accounts lightly but regularly
For
a credit score to be generated, you have to have had credit
for at least six months, with at least one of your accounts
updated in the past six months.
Using your cards regularly should ensure that your report
is updated regularly. It also will keep the lender interested
in you as a customer. If you get a credit card and never use
it, the issuer could cancel the account.
Just
remember the credit tips mentioned earlier:
- Don't
charge more than 30% of the card's limit.
- Don't
charge more than you can pay off in a month. As mentioned
earlier, you don't have to pay interest on a credit card
to get a good credit score, and it's a smart financial habit
to pay off your credit cards in full each month.
- Make
sure you pay the bill, and all your other bills, on time.
Liz
Pulliam Weston's column appears every Monday and Thursday,
exclusively on MSN Money. She also answers reader questions
in the Your Money message board.
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