 Building credit when you're young
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 Dear
Dr. Don,
My question is about credit. How does a 21-year-old get a credit
card to get some credit report in his record when everyone tells
you you're too young or there's not enough in your credit report.
-- Ollie Orchestrate
 Dear
Ollie,
It's one of those Catch-22 situations. You need a credit history
to get authorized, but can't build a credit history without outstanding
loans. There are some ways to finesse the issue and get things rolling.
When I was first building my credit history, the conventional
wisdom was to start with an oil company card and a Sears card. A
solid payment history on those cards would let you graduate to a
Visa or MasterCard. That wasn't always an easy road because Sears,
at the time at least, was known for being very aggressive about
reporting any negative information about your payment history with
them. (Citibank now offers the Sears credit card.)
Becoming an authorized user on someone else's account
might get his or her payment history on your credit report. Credit
card companies are required to report the payment history when the
authorized user is a spouse. It's at the company's discretion
when the authorized user is not a spouse.
If you have a parent, relative or friend who is willing
to list you as an authorized user, ask him or her to confirm with
the card provider that the payment history is reported on your credit
history, too. It's not all sunshine and daffodils, however,
if the cardholder doesn't have a good payment history, as this Bankrate
feature, "Dangers
of being an authorized user," points out.
Another approach is to apply for a secured credit
card. With a secured card you put money on deposit as a reserve
against nonpayment for card purchases. Most secured cards limit
your credit line to the amount of money on deposit. You can
compare secured credit card offers using Bankrate's credit
card search page. Avoid credit card offers that make you pay
to play. A $350 application fee is money much better used as
a deposit on a secured card.
Talk to your bank or credit union to see if it is
interested in offering you a card. One caution here is to not
apply for multiple credit cards. Pick and choose. Every
time you apply for a credit card, that application shows up on your
credit report. It stays on your credit report for two years
and influences your credit score during the first year. Multiple
rejections make it that much harder for the next lender to say "yes"
to your application.
Finally, track how you're doing by requesting copies
of your credit report from Experian, Equifax and TransUnion. You're
entitled to one free copy every year from each of these credit bureaus. I
request a different one every four months. A Bankrate feature,
"How
to get your free credit report," tells you how to get your
free credit reports. Since your credit score is based on the
information in your credit reports, you'll get a sense of how you're
doing by reviewing the reports. Use Bankrate's FICO
score estimator to get a free estimate of that credit score.
To ask a question of Dr. Don, go to the "Ask
the Experts" page and select one of these topics: "financing
a home," "saving & investing" or "money."
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