How To Generate Credit Scores and Establish Credit

This guide is the quickest way to establish credit. As a mortgage broker, I have perfected this method, using it for several clients so they could qualify for home loans. Although it has become harder to establish credit, if you follow these steps, you will establish credit fairly quickly and then in turn establish credit scores. This guide is not for those who have bad credit. If you have bad credit, please go to my guide that raises credit scores here on this site. This guide is for those who have no scores.

There are several ways to establish credit, but I will provide the quickest and easiest way to do so.

Introduction

It is important to understand that paying utility bills and your cell phone bill do not give you credit or credit scores. It is true that you can apply for a home loan with no credit and use non-traditional credit (utility bills, medical bill payments, cell phone bills and auto coverage bills) to apply for a FHA loan, but you will not receive the best rate available. The only way to generate scores is through auto loans, credit cards, mortgages and installment loans. Also, there are different classes of credit.

The highest class of credit is a major credit card through either Visa or Master Charge or both. This is known as “Major Credit.” Getting one of these should be your first goal, and it is not that hard to do. Although much less important, “junior credit” is the easiest to get especially if you have a major credit card through Visa or Mastercard. Next after you establish both major credit and junior credit you are going to want to get an “installment loan” (auto loan) which is the next form of credit, but this is not necessary to establish credit scores.

1st Step: Have a family member or a close friend make you an “authorized user” on a major credit card.

This is not as big as a request as you think. The original card holder can have your card sent to their home address so you cannot use it. It will immediately be added to your credit report. It will not immediately give you a credit score though, but it will greatly help once you get started.

2nd Step: Secured Credit Cards

This is the first place to start and is virtually a guarantee you will get credit, that is the good news. The bad news is you have to put a deposit down with the creditor to receive a credit limit. The best card for this is to apply for the Capital One Platinum Secure Card. It will give you a $200 credit limit with only a $49 “secured” deposit. The interest rate is over 24% but that is really no big deal on $200 and you are not planning on using it for long tern financing any way. 24 percent times $200 is $48 a year.

Another option is to use the Discover card at 10.99% interest rate but you will have to put $200 up in security deposit.

3rd Step: Key Department Stores

One outlet is the most aggressive with establishing credit than any other and that is Fingerhut. Definitely apply there first.
There are at least 3 department stores that are aggressively providing small credit limits on the spot. These 3 stores are Kohls, JC Penny and Home Depot. The best technique is not to apply on line but actually go into the store and bring about $50 in merchandise to the check out counter and apply right there. It takes about 5 minutes. In many cases, you will receive up to a $500 credit limit. It is very important to bring merchandise to the checkout stand. Department stores want to move merchandise and have a more liberal approval policy at the checkout stand.

4th Step: Gas Station Cards

Chevron, Shell and 76 are all aggressively trying to get your business and after you secure a major credit card, even an authorized user one, you should apply for one of these.

5th Step: Use Your Cards Right Away and Pay Them Off

Make sure you use all these cards immediately and pay them off within the same month. The more you use them and pay them off, the better off you will be.

Summary:

It use to be that credit scores could be established within one month of doing all these things, but since the credit reporting overhaul last year, it takes over 60 days to establish scores, but if you do what I suggested, it could happen even faster.

RC Advantage

Ralph Migliozzi

Broker Originator Serving Northern California 

NMLS 282851 DRE #01002038

(p) 530-330-3073

rc-advantage.com