How to Build Credit in a Recession - Even with No Credit

The American economy is spiraling downwards. Unemployment is rising quickly. Consumer confidence is down. Mortgage defaults are up. The Dow Jones is up and down. How, in such an unstable economy, can you build good, solid credit when all around you there is default, foreclosure, and rising prices?

It is possible to build credit, even in a recession. Despite what happens to the economy, your spending and repayment habits can work for you in positive ways. Since most of your credit score is based on how well you pay your credit obligations, as well as how much of your available credit you actually use, you can still be in control of building good credit, even in times of recession.

1. Obtain a Gasoline, Department Store, or Secured Credit Card

If you have bad or no credit, you can still use credit cards to start rebuilding a positive credit history. Make positive results on your credit report by getting approved for a secured credit card or by obtaining a gas or department store credit card. Gas and department store cards typically are easier to obtain, and a secured credit card is almost guaranteed with your monetary deposit that acts as your credit limit. With a new card, you can begin the process of rebuilding credit.

2. Use Only One Credit Card

If you already have multiple credit cards, determine that you will only use one, or no more than two, with the lowest interest rates.

3. Keep Well Below Your Credit Limit

Regardless if you have a secured or non-secured credit card, you can improve your credit score by keeping your balance well below your limit. Part of your credit score is determined by what percentage of available credit you use. If you keep your credit balance low and available credit high, you will start making positive marks on your credit score.

4. Pay on Time

Always pay your credit card bills on time each month. The thing that affects most consumer credit scores is late payments showing up on credit reports. Every late payment shows up as a negative mark. And payments 30 days late or more have an even greater negative impact. In order to build your credit, you need to discipline yourself to pay on time every month.

5. Pay In Full Each Month

In order to stay well below your credit limit and avoid interest and finance charges, you should pay your credit balance in full each month. If you are unable to pay in full, you should at least pay much more than the minimum required payment. Paying only the minimum amount as determined by your credit card company can translate into years of payments before you pay in full. Avoid this hassle by paying in full as often as you can.

Your credit history is always keeping score. Regardless of whether the economy is working full speed or in recession, or whether the stock market is bullish or bearish, you can improve your credit score. Take the time to make the right choices and disciplined payment practices, and you will be on your way to building a higher credit score.

Write to Grace Carter at grace@creditdonkey.com

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