How To Build Credit With No Credit History

The good news about having no credit is that you don’t have bad credit. Even better, you have the potential to build great credit, which is easier to do with no credit than damaged credit. That being said, it still takes time and careful planning.

If you’re just getting started on your credit journey, here are several tips to make the most of the opportunity.

Apply for a Credit Card

Student Credit Cards

If you’re young and in school, consider getting a student credit card. In general, these are forgiving cards that have lower credit limits and no annual fee. They’re perfect for students and designed to get you started on the right track.

Secured Credit Cards

If you aren’t a student, don’t worry; there are still options for you. Try applying for non-student unsecured credit cards first. If you’re having a hard time getting approved, then try applying for a secured credit card. They are great for non-students trying to build their credit as well.

Secured cards come from a variety of different financial institutions and require a cash deposit as collateral for the line of credit they give you. For instance, you may be approved for a secured credit card with a $300 credit line, so long as you have $300 in savings or checking to back it up. With timely payments, your credit limit can be raised, and eventually, you could receive an unsecured card with your deposit returned in full.

Retail Credit Cards

Another alternative is to get a card from a retail store. They often offer incentives to apply for a card from them when shopping at their stores. However, applying for a card every time you are offered a discount can negatively impact your credit score. The downside to retail store cards is that while they often have an associated discount, they typically have higher interest rates than other credit cards, and you’ll likely be restricted to shopping at their stores.

Treat the Credit Card Like a Debit Card

When building the credit you should always try to treat the credit card as if it were a debit card. You shouldn’t buy anything that you can’t already afford to pay off in full. This ensures that you will be able to pay off the full amount each month and avoid paying interest. Although the purpose of credit cards is debatable, most people agree that they’re best for cash flow management, not making purchases you hope to afford in the future.

Pay the Credit Card by the Due Date

Having a good credit score tells others that your word means something. Pay off your balance in full each month, as this is reported to the three major credit bureaus and helps in calculating your credit score. This is how your credit score is built over time. Avoid only paying the minimum amount each month, which leads to interest charges. Always pay as much as you can if you can’t afford to pay it off in full.

If you struggle with keeping up with due dates, set up automatic payments to your card, either for an amount you choose or the statement balance. This ensures you won’t miss a payment, and it can help you budget along the way.

Consider Rent and Utilities

Putting rent and utilities under your name is an alternative way to build credit aside from credit cards. By paying rent and utilities, you’re establishing a positive payment history. Not all places that rent housing report timely payments. This is something to ask your property manager about if you’re currently renting or looking to rent. Having the rent and utilities under your name helps ensure payments go onto your credit report and not someone else’s when they do get reported to the credit bureaus.

If you find they are still not getting reported you can try using a free service such as Experian Boost to add them yourself.