3. How to Build a Good Credit Record

If you're new to credit, many of these criteria may not yet apply to you. Even if that's the case, it's important to keep them in mind as your build your credit history. Here are some suggestions to get started:

Apply for your first credit card. This might be a general bank card, a department store card, or a gasoline station card.

  • However, don't apply for too many credit cards in a short time period (6-12 months). The number of credit applications you submit — even for retail store cards — may show up on your credit report and can be a red flag to potential creditors. Any red flag may cause them to deny your application or charge you a higher interest rate on your credit line.
  • Opening several lines of credit may also lower your credit score, because it may reduce the “average age” of your accounts — a key criteria in determining your credit score.

BBB Tip: Getting Your First Card

Shop around before applying for a new credit card. Different banks, department stores, gas stations, etc. offer different interest rates and different payment terms. Choose a card that offers the best interest rate and payment terms you can find.

If you have trouble qualifying for a credit card:

  • Contact your bank and ask what you can do to get a credit card. One possible option the bank might suggest is to issue you a card with a low credit limit that you can gradually increase as you show that you can pay your bills on time.
  • Another possible option the bank might suggest is to apply for a Secured Card. This product requires you to deposit a certain amount of money into a savings account before you can use the credit card [it's basically like a security deposit]. Most banks that offer secured cards match your credit limit with the amount of money you've deposited into the account. As you build a strong track record with your bank over time, you can request an application for a general purpose credit card.

BBB Tip: ‘Secured Cards’

A bank-issued ‘Secured Card‘ can be a great way for a new borrower to start building your new credit profile. But you need to be mindful of potential fees some banks charge for this product — such as an application fee, a processing fee, and an annual fee.

Stick with lenders that charge low fees and give you the option to upgrade to a non-secured card.