CardRates.com Guide: No Credit
In our modern culture, a valid credit history isn’t just a nice thing to have — it’s often a necessity. Without a credit history, you’ll have a difficult time securing reasonable loans, renting a home or even getting hired for certain jobs. A credit history allows potential lenders to extend you credit, but it’s also a way for others to verify how responsible you are with your finances.
If you’ve never used credit at all, how do you begin to building it? That’s the proverbial catch-22 when it comes to establishing credit – you need to have it in order to get it. However, there are ways to begin building a good payment history and have it reported to the credit rating bureaus, which is what ultimately builds your credit history.
A secured credit card is a great way to start building a credit history. Many credit card issuers offer secured cards and report your payments to the credit bureaus. You place a certain amount of money, typically $300 to $500, into an account with the credit card company. The company then issues you a card with a credit line for that same amount.
By using the card and paying off the balance, you can establish a good payment history. After six months or so without any late payments, you can request that the card be switched to a full-featured credit card.
This is often a lot easier than a standard credit card because the credit limits are usually lower and the interest rates higher than most credit cards. However, these cards serve the same purpose of getting your credit history started because these companies also report your payment history to the credit bureaus. Just be sure not to miss any payments!
There are services that now act as intermediaries by taking your rent payment and paying the landlord for you. The service will then report your payment history to the rating agencies. Other services allow a landlord to upload payment information directly into a website for reporting as well.
If you need to establish a credit history to get a loan – say for a used car – you may consider having someone cosign the loan with you, using their credit history to help you qualify. You’ll get your name associated with a loan and begin building credit.
If you know of someone who is willing to have your name put on their credit card as an authorized user, this is another way to get a credit history started. You can take advantage of their payment history without even necessarily using the card. Just make sure that whoever you ask to help you has a good record of making on-time payments!
Follow these tips to get started on your credit history, even if you’ve never used credit before. Just remember to always make your payments on time, never exceed your credit limit and keep your balances low. Soon you’ll have a credit history you can be proud of.
Photo source: creditcardchaser.com
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