When I first turned 18, getting new credit was tough. No one (and I MEAN NO ONE) would give me an approval for my first credit card. I even tried getting a new car loan to buy a cheap 1999 Honda Civic DX; I was not approved.
(I really needed that car too, my existing Honda Prelude from 1988 had almost 199,000 miles, and I thought the transmission was going to fall out.)
The most frustrating part of my experience trying to obtain my first credit account was not the constant rejection from creditors. It was seeing my friends getting approved and buying all kinds of things; like High-End Clothes, Sports Cars, Jewelry, and Stereo Systems.
(Looking back I realize that buying those things on credit is a dumb idea. But, at the time, when you’re 18 years old, it’s a different perception of reality.)
Finally, some good news
By the time I turned 19, it finally happened for me. I was at Macy’s doing some clothes shopping and decided on a whim to apply for one of their credit cards. The cashier had offered it to me.
Initially, I was turned down, but then a week later they reconsidered and gave me a Macy’s credit card with a 100 dollar limit. They mailed it to me with an approval letter.
Once I got that first credit card I was in. It was unsecured, and I could start building a payment history to raise my credit score. To learn more about what a credit score is, check out this Wikipedia article about FICO.
My credit score starts going up a few months later
After using my new Macy’s credit card for a few months and paying it off every month, they bumped up my available credit from 100 to 500 dollars.
Shortly after that happened, I checked my credit report for the first time. I saw that my credit score had jumped from being under 580 to a 600. For kicks, I rechecked it six months later; it grew again from a 600 to a 640.
Then I got another credit card by Discover with a 2,000 dollar limit. After one more year my credit score was a high 680.
Buying my first home and new car
This higher credit score allowed me to easily qualify for first-time home buyer financing using an FHA loan. The dream was real, I was finally ready to buy my first home when I turned 21.
Without some type of credit payment history, there was no way I could have become a homeowner at such a young age!
I closed escrow, got the keys, and moved out of my parent’s house. Freedom at last.
For more information on why purchasing a home is a good idea, check this out: Should You Buy A Home?
Six months after my home purchase and having a mortgage reporting on-time payments to my credit report, my score jumped up to a whopping 720. I was 22 years old and finally able to get a good interest rate on a new auto loan.
So I purchased the new car of my dreams, a 2001 Toyota Tacoma 4X4. Now that I was a homeowner, a new truck was a necessity.
I recently sold that Toyota truck after having it for almost 18 years; I wrote an article about my experience owning it and you can read all about it here: Old Cars & Trucks Drain Your Wallet
Building Credit Before The Year 2000
Back during the late 1990s, the Internet had very little information available about building credit. The best resource was the books I got from my local library and asking other friends about what new credit card they just got approved for.
Today in the year 2018, that Macy’s card would be a horrible first credit card to apply for as the requirements are much stricter now. Plus, credit cards are always changing their terms so it’s best to do a search on Google for the keywords “best first credit card to apply for” to see what you can find.
Recently I found a pretty good article that lists some fantastic first credit cards. Check out: 7 Great Picks for Your First Credit Card
Don’t Go Mindlessly Into Debt!
Instead, learn to control your debt by using your credit cards to purchase everyday items and pay off the balance every month. It’s the easiest way to build up a high credit score. For the bigger purchases you make in life, it’s also OK to use an Auto Loan or Mortgage. Just don’t overdo it!
It’s a frustrating process when you’re building up your credit score/history and starting from a low point. But, once you have a good credit record, life gets much easier when applying for certain types of jobs that require good credit. As well as renting that next home or rental car.
Tell me about your credit building story, was your journey as a young adult hard? Comment below.