Don't have a credit card yet? Here's how to get one -- fast.
"The best way to get credit is to be in debt," says Todd Meagher, president of Credit.com, a consumer-education Web site.The reason?
You need a history of repaying debt so credit-card issuers can gauge how reliable you are when it comes to repaying.
Credit card and mortgage payments are regularly reported to the three credit bureaus (Equifax, 888-532-0179; Trans Union, 800-888-4213; and Experian, 888-397-3742), but most consumer payments -- including rent, insurance and even student loans -- are not reported, unless there's a problem.
"You could pay your rent and utilities for five years and be a good customer, and you won't get any credit for it," Meagher says.
The good news: Competition is so fierce among card issuers that you may be able to establish a satisfactory credit history in as little as six months -- rather than the year or more it used to take.
Start by checking copies of your credit report.
If you've been turned down for credit within the past 60 days, the credit bureaus will send you a copy of your report free; otherwise, you'll pay up to $8.50 for each report. Correct any errors and clear up any disputes before you apply for a card.
Apply first at the bank or credit union where you have a checking or savings account. As long as you're employed full-time and haven't bounced any checks, your bank will probably be willing to issue you a card with a low credit limit -- say, $200 -- and gradually ratchet up that limit if you pay your bills on time. The longer you've lived at your current address or worked for the same employer, the safer a risk you are.
First-time cardholders with limited or no credit history rarely qualify for low interest rates. But you should take the card anyway, Meagher advises. "You can always renegotiate the rate after six months."
One of the fastest ways to get credit is to apply for a secured card, which requires you to deposit money in a savings account or CD that is frozen while you have the card. The amount of the deposit varies. For example, you'll need to put down $99 for a Capital One secured Visa or MasterCard (800-445-4523) to secure a credit limit between $200 and $500. The card charges 19.8 percent interest, and there is a $29 annual fee.
Avoid issuers that charge exorbitant or unnecessary fees, or that deal exclusively in secured cards and don't offer the option to upgrade the card to one that is unsecured.