No Credit History? One of These 9 Tips Can Help You Get Credit
It can be challenging to build credit if you have no credit; however, in this post, we share steps you can take if you want to begin building credit.
You might have heard the saying, to get credit, you must have credit- which can be very frustrating as a credit beginner.
Most milestones in life, like leasing a car or buying a house, need credit history; however, if your credit score is bad (or even nonexistent), you will possibly find it challenging to get accepted. Most credit cards also need some kind of credit history to be eligible, with only a handful of credit cards made for people with no credit.
There are several methods you can use to build credit even though you are just getting started. Here are some of the moves you should consider if you have no credit history, and you want to start building credit.
Start working on your credit score before you really need it
If you know you will need to borrow money in the future, like a mortgage in the next fear years, it is usually a better way to start building your credit score before you need it. You can begin small, get a modest credit card, use it for your regular payments, and pay it off before you are charged. If you wait till you need to borrow money to get concerned about your credit score, you may find your options are minimal.
Use a credit broker
If you have already exhausted other alternatives or you simply need something that can give you money faster, a credit broker may be the right solution for an urgent loan. Credit brokers match your loan needs up with providers who might have less strict requirements, assisting you to get money faster when you really require it. For example, Growing Power is a credit broker that can help you get money in your account today in the kind of day loans. This is an excellent option if you are in dire need of cash for something urgent, like a car repair or even unforeseen medical expense.
Become an authorized user
One of the easiest ways to build credit is by becoming an authorized user on a friend’s or family member’s credit card. You can piggyback off the main account holder’s credit as an authorized user and, as a result, build your own credit history. Authorized users also have zero liability; thus, it is a low-risk way to build credit.
However, before you become an authorized user, ensure your family member or friend has good credit and uses the credit card responsibly. You do not need to become an authorized user on an account with debt or late payment history; thus, those negative actions will show on your credit report and counteract any credit building you plan on attaining.
Also, you need to ensure you practice responsible behavior as well. You will want to create a clear plan for how you will pay back any purchases you make with the credit card, so you do not risk racking up your debt on someone else’s credit card.
Get a secured loan with a guarantor
As far as you have an asset or someone prepared to act as your guarantor, then a secured loan may be something you consider. This can be a lengthy process, and typically makes more sense for bigger purchases items like car loans or home loans. The amount of paperwork that is needed usually does not make sense for smaller, short term loans. If your credit history is not the best, you are possibly going to have to request someone to be your guarantor, typically stating that they will take over responsibility for the money if you are not able to make payments for whatever reason.
Borrowing cash can be a great way to build up a credit score, and as far as you keep on top of your repayments, you can prevent paying interest. Moreover, it can be a lifeline to get out of an unforeseen financial situation. If you have declined for credit in the past, now it is the right time to keep improving your credit score so that it will be a better result when you need it.
Get credit for paying monthly utility and mobile phone bills on time
If you do not want to use a credit card to build credit, there are more alternatives. Several financial institutions provide credit building tools; however, they might charge a monthly fee. Nonetheless, Experian offers a free and simple-to-use tool, Experian Boost. The tool counts positive payment of utility and mobile phone bills in your credit file, enabling you to build credit.
Just connect the bank accounts you use to pay your cell phone and utility bills, verify the data, and confirm you want it included in your Experian credit file. You will get an updated FICO Score immediately and get a free copy of your Experian credit report.
Get a store card
Most retailers and gas stations will give you a branded credit card, even though you have no credit history. Use it, but do not purchase more than you would buy with cash. Pay off the entire bill at the end of the month. Request that the department store reports your credit history to credit unions.
Apply for a credit-builder loan
A credit-builder is a loan used specifically to build a credit score. The creditor will put the money you borrow into an account, and you will make payments on the money till the entire amount is paid. The lender will inform the credit-rating bureaus as you make payments. When the loan is paid, the money is released to you, and the credit bureaus have a basis for assigning your credit score. Credit unions and community banks are usually the best places to check for this kind of loan.
Consider a student credit card
If you spend conscientiously, credit cards crafted for young borrowers can be a way of building a credit history. These introductory credit cards have disadvantages, including higher interest rates and low borrowing limits. You should not apply for one of these cards unless you are confident you have the cash to meet the monthly bills.
Finance a store purchase which has a same-as-cash offer
Particularly around holidays, stores allow you to buy items on credit with a deal that enables you not to pay interest for a set period- often for ninety days. Because this is a kind of loan, it can help you establish good credit if you pay it off on time. To avoid paying interest on hidden charges, ensure you pay this loan off before the allotted period expires and ensure you read the fine print before signing up. Offers like this can be found both online and in-store.
Should you take out a small loan to build credit?
One poor piece of advice often given to people with no credit report is to get a small loan from the bank and pay it back on time. This might be a bad idea since it is a waste of money. You will need to have to pay interest on that loan, and despite how good the interest rate is, why would you borrow money that you do not even need? It is not necessary to pay interest to establish good credit, and the only debt you should incur to build credit is very temporary types that happen between the time you charge a purchase to a credit card and several weeks later when you pay the bill in full.
Be careful about taking auto loans
Another bad way to build a credit history is by buying a car from a dealership that advertises ‘No credit at all! Bad Credit! Good Credit!’. If you do not have a credit history now, you are already doing better than many people since you are possibly debt-free. Do not ruin that sense of financial security by accumulating thousands of dollars in debt to purchase a car. A costly car is not a necessity, and you will almost always be better off financially if you stick with whatever car you can pay cash for.
Nonetheless, if you are already planning to purchase a car with cash via a dealership, you can go ahead and take out a dealer financing to buy the vehicle, and then pay the loan back in full after you have made just one monthly payment. This way, you will pay less interest, but you will build a reportable report of using credit responsibly and making your payment on time.
Some people have even had better deals on cars this way since the dealership makes so much of its money from financing car loans. They may give you a lower total price if they think they will be making interest off of you, thus even though you will have to pay a month’s worth of interest under this plan, you will possibly come out ahead as a result of the lower price on the car. Just ensure that you understand the loan terms and ensure that there is no prepayment penalty before you sign for this plan.
Whereas this plan will not help you with the length-of-credit-history factor of your credit score, it may give you the push you require to get an unsecured credit card that you can use for many years.