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"That's less likely to happen now because of where we are right now. But there was a time when someone with a very thin credit report and a limited amount of information on the report was being offered pretty impressive lines of credit -- $5,000 or $10,000 lines of credit," he says.

Get around a Catch-22
Today's environment means credit issuers are less willing to grant large loans willy-nilly -- and they may be downright penurious when it comes to unknown borrowers.

That's because lenders don't want to be the first to lend money to a person with an unknown risk profile.

"It's the same situation as if you were asked by a stranger at a bus stop for $50 and they promised to pay your back," Watts says.

"You would want to know something about that person before you gave them 50 bucks. One of the things you would want to know is, have they borrowed 50 bucks from other people at a bus stop and paid them back reliably? It might make you feel a little better about parting with your hard-earned cash," he says.

Consumers in a thin-file predicament find themselves in a Catch-22 situation not unlike college grads who apply for jobs requiring experience. To build up a history, prospective borrowers need to get credit. But how can they get credit if they need credit to get it?

You can go about this in a few ways.

Go for retail or gas company cards
Most shoppers have participated in a transaction in a department store during which the clerk launches into a sales pitch for the store card. Most retail store cards, as well as gas company cards, offer some perks for signing up, plus they're somewhat easier to obtain than general-use credit cards.

"Typically those card issuers are more tolerant of thin-file people because their risk of exposure is so much smaller than the Visa or MasterCards of the world," Watts says.

One downside is these cards often sport higher interest rates, so it behooves borrowers to pay the bill in full each month. Another big drawback is that not all of these card issuers will report your on-time payments to the credit bureaus.

"You do want to make sure that they are reporting your payments to the credit bureaus," says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling in Silver Spring, Md.

"For instance, don't go down to the corner drugstore, which may have in-house charge accounts. They may set up an account but not report it," she says.

-- Posted: Jan. 26, 2009
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