Friday, October 23, 2009

You Can Build Credit on an Entry-Level Income

The best choice in this case would be to get added as an authorized user on one of your parent's cards or another close family member. This only works, however, if the person actually has good credit and trusts you enough to add you to the account.

Option #2: Get a Secured Card

The next best option to build credit when you can't get a credit card and don't want to take out a loan is to obtain a secured credit card. Also known as prepaid credit cards, they get their name because they are "secured" with an initial deposit that usually equals your line of credit.

The deposit serves as back-up for the issuing bank should you fall behind on payments and become unable to use the card. Generally, it takes about a year of steady secured card use before you will be promoted to a regular, unsecured card.

You must be very careful if you take this route. Secured cards tend to have more fees and higher interest rates. Be sure to research your options thoroughly before applying for one.

Also, not all secured cards report activity to the major credit bureaus, so using one that doesn't is pretty pointless. provides a list of prepaid cards that will aid you in establishing and building good credit if you're interested.

Ideally, using one of the two options will help you to establish good credit while practicing solid financial behaviors. That way, when it's time to take on a serious loan or line of credit, you will be prepared to handle it responsibly.

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