Posted by Income Taxes and Bookkeeping LLC

Ways to Build Your Credit with No Credit History

Ways to Build Your Credit with No Credit History

People new to credit might have a tough time getting a lender who will approve them for a loan. Also known as credit invisible, consumers don't have good payment history reported to the credit bureaus to give them a credit score.

A lack of credit history might not be a big deal for people who use cash majorly and see no reason to borrow money. However, everyone finds themselves needing a credit history to finance a car, a home, and a thin credit file might make you miss your dream ride or home. Also, a strong credit profile comes in handy in applying for a job, renting an apartment or buying insurance. 

The good news is, building credit from scratch is possible. The earlier you start, the better position you will be to finance your goals tomorrow. With this, here are four ways to build your credit:

  1. Be an Authorized User

The absence of a history of managing credit accounts might make it challenging to be approved for loans and credit cards. However, you can become an authorized user on the credit card of a family or friend. This way, you can build credit without applying for your credit card. 

An authorized user will be added to the cardholder's primary account, qualifying you for a separate card card. With this, you can buy anything provided you agree with the account owner already. You will see the credit card account alongside the payment history, which will help establish a credit history. 

When requesting someone to add you as an authorized user, ensure that the authorized user account is reported to the credit bureaus. Such a strategy might waste your time and resources if payments are not reported. 

In addition, don't just piggyback on anyone's credit history. Prioritize account holders with concise payment history who keep balances low. 

  1. Request for a Secured Card

Another strategy to build credit is by applying for a secured credit card. You can easily qualify for a secure credit card compared to a regular unsecured card since you need to make some upfront deposit which "secures" the credit line.

Your deposit is a factor of the credit card. Some require a $49 credit deposit, while you might have up to $200 with others. They also come with varying credit limits, often the same as the deposit amount. 

You might be faced with annual fees and other extra fees. Ensure to shop around if you need one, to see the ones with credit that aligns with what you need. 

On establishing a credit history on such a secure card, you might be qualified for your deposit, alongside the chance of upgrading to an unsecured card.

  1. Request for a Store Card

Generally, it is easier to qualify for credit cards offered by stores than other unsecured credit cards. As long as you are a frequent shopper, consider signing up for a store card. It is a simple way to build a credit history while shopping for things you need. 

Store cards, however, come with the cons of charging higher interest rates compared to other cards. As a result, ensure to pay off the entire balance every month if you use a store card. It will save you from excess charges.

  1. Ensure Your Rental Payments are Reported 

All your prompt payment of your rent can also help you build credit every month. Rent payments are not included in your credit reports like utility payments. However, you can specially request that your landlord report every prompt rent payment you make through Experian RentBureau. 

For people without this option, you can also get help from third-party rent payments for help in reporting such rent payments. Such firms might charge you for monthly or annual fees, which you should consider before signing up. 



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