How to Build Credit with No Credit History

Many people underestimate the importance of having a credit history. Building credit is very difficult when you do not have a credit history, and it is also something that is very important in order to be able to function in daily life. A lot of the time, you need a credit history in order to be able to get a loan, an apartment, or a credit card. You may wonder how you can go about building a credit history if you have no credit history to begin with, but you should rest assured that there are ways to go about this.

There are a few ways that you can establish a credit history, including getting approved for an installment loan through a lender like, getting a secured credit card, or getting a credit card for those with little to no history of borrowing and credit usage.

When applying for an installment loan, approval is typically based on income rather than credit score, making this an attractive option for individuals lacking a credit history. Borrowers will also need a checking account, which can be opened at any local bank or credit union. Successfully paying back the lender on time will lead to a positive account on your credit history file.

If you choose to apply for a secured credit card, it will generally be backed by an upfront cash deposit that is equivalent to your credit limit. You will need to use it to make purchases and make payments on and before the due date every month. You should keep in mind that you will end up accumulating interest if you do not pay off your full balance every month. Additionally, they will hold your deposit as collateral if you do not end up making your payments on time. A secured card is meant to help you build your credit up so that you can get an unsecured credit card that comes with better benefits and that you can get without a deposit.

Another option is to get a traditional unsecured credit card meant for those with little to no credit history. The interest rates tend to be pretty high, but responsible use means they will get lower as time goes on. The key is “use”; credit cards which are not used and end up being canceled can hurt the cardholder’s score. However, avoiding a pile of credit card debt is also important. The key is successfully using credit responsibly.

Another thing you can do is attempt to get credit for the rent you are paying. There are rent reporting services that will take this bill and actually put it on your credit report so that it can count in your favor when you are trying to build a credit history.

When you are trying to build a strong credit history, it is important that you establish and keep good habits. You need to make sure that all of your payments are made on time, not only with specific accounts that are related to credit but also with other bills, such as utility bills.

Make sure that you keep your credit utilization as low as possible, because having balances that are close to your limits will lower your credit score. You should aim for full payments of your balance every month, but at the very least you should make sure that your balance does not get to any higher than 30% of your credit limit. Try not to open too many accounts at once, as this will lower the average age of your accounts and lower your credit score.

Additionally, keep as many accounts open as possible, as long as they do not carry annual fees, so that you can increase your average age of an account. You should also make sure to check your credit reports every year to make sure there aren’t any discrepancies.

Author: Calvin Brycen

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April 2018
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