At one time people were able to walk into a bank with $1000 in cash to secure their first $1000 credit card. Their new card was 100% cash secured which removes most risk from the bank to help someone establish themselves within the financial sector. This seems simple enough right? Today however, times have changed somewhat.

For many reasons this is no longer widely accepted, and I would be surprised if hundreds of major American banks still advertise and promote this type of product. I know there are some banks that do supply and provide a 100% secured credit card, but there isn’t a large profit margin in this kind of financial product.

Student credit cards are sometimes easier to get, as it is understood this age group is attempting to establish their initial credit. If you are a student, I recommend you apply for this type of credit to help establish your credit history early on. If you are not a student, unfortunately you won’t qualify.

For most people it is easier to obtain credit from a department store, or retail outlet your first time, versus applying with your bank. Buying a piece of furniture from one of the stores that doesn’t need to be paid for a year is a good way to establishing credit. Though this type of buying can be expensive, it is an easier credit the most obtain. Financing for these promotions will usually be at higher interest rates than banks, and carry penalty charges should you not meet your commitments and make your payments on time. You are in effect establishing a good credit reference by using this type of financing so the next time someone looks at your credit file they will be able to see your furniture debt paid in full.

Your phone, cable, and general utility bills will likely not appear on your credit bureau record. The only time (presently) these trade lines will appear on your report is when you don’t pay them and they go to collection. They currently are not members of the credit bureaus and therefore don’t publicly report your account information. This tells us unfortunately, that even though you may be meeting your commitments with these services, there is no way to improve your credit score because of it. To your benefit, it also does not reveal if you pay them slowly (take 30 or more days to pay your bills).

You will need to obtain some other form of credit to actually have it reported on the credit agency databases. Telling a lender that you have an excellent repayment history with the phone, cable or utility provider means nothing to them. It is expected, or you would not have the privilege of these services (the supplier would have cut your services off if you hadn’t made your monthly payments).

A gas, or major department store credit card is also easier than most others to obtain due to their low starting limits of about $500. (Banks don’t usually provide credit cards with limits lower than $1000). You will be putting up with a larger interest rate for the privilege of receiving a credit card to help establish yourself in the financial industry. Once your credit is established (at least one to two years) it’s a good idea to close the department store and gas cards after replacing them with a conventional bank’s lower interest credit card (examples: Visa, MasterCard, or American Express) – it’s entirely up to you – it’s your call.

Continued in the Carol’s Borrowing Series Category of Clf.