How to Build Credit Fast With No Credit History
Are you getting rejected applications by creditors due to your poor credit score? Read this article to find out how to build credit fast when you have zero credit history.
Getting credit is tricky business. Without a credit history, it can be extremely difficult to obtain a loan, a credit card, or sometimes even an apartment.
But how are you supposed to show that your responsible for making repayments if no one is willing to give you the credit in the first place?
A bit of a catch-22, isn’t it?
Definitely. But don’t worry, this seemingly endless loop does have an escape route.
There are ways to build credit with no credit history. And, you can do it fairly quickly too.
Interested in knowing what those ways are?
Get a Secured Credit Card
If you’re wondering how to build credit fast, getting a secured credit card is a great place to start.
What’s so great about a secured credit card?
Almost anyone can obtain them. The only catch, you must put down a security deposit- usually around $300 to $500- to get approved.
Usually, the deposit amount is the same as your credit limit. So, it’s definitely much less than a regular credit card limit, but you gotta start somewhere.
Other than that, this card operates just like a normal credit card. You’ll use it to make purchases, you’ll make payments on or before the due date (hopefully), and you’ll incur interest should you not pay your balance in full.
But don’t confuse these cards with debit cards- they are quite different. With a debit card, the payment is made upon the transaction.
And, most importantly, you can’t build credit with a debit card. Unlike secured credit cards, their usage does not get reported to credit bureaus.
Secured credit cards are only meant to be temporary. They’re a great first step in building credit fast. Just make sure to choose one with a low annual fee and make sure the creditor reports the card to all three credit bureaus: Equifax, Experian, and TransUnion.
Get a Student Credit Card
If you are still a student, getting a student credit is another option if you’re wondering how to build credit fast.
Much like a secured credit card, student credit cards are very easy to obtain.
However, they are also temporary solutions. They tend to have lower credit limits and higher acceptance rates.
They can be a good alternative to a secured credit card though, as many of them with promotional offers and rewards. And every college student knows how much saving a few dollars can mean!
Get a Retail Credit Card
If you’re not a student but would still like some perks with your card, consider applying for a retail card at one of your favorite stores (maybe not your absolute favorite one though, you don’t want to go swipe happy!).
However, while they do offer some perks, you need to be very careful with retail credit cards.
Their interest rates are often extremely high and the credit limit very low.
Try to keep the maximum you spend on these cards at 30 percent of the limit. That way, you never have to worry about being stuck in a situation where you can’t pay it off and end up damaging your credit score.
Only Charge What You Can Pay Off
Whether you go with a student card, retail card, or a secured one, the most important thing is to make sure you pay back any money you charge.
Paying back charges in full and on time is exactly how you build credit. It’s your way of proving to creditors and lenders that you are capable of responsibly managing debt.
If you are worried about missing payments, unfortunately, opening a credit card and sitting on it is not an option. You need to be spending and paying off in order to build your credit.
That’s why it’s super important to only make purchases you know you can pay off in full and on time. Try to stick to using it for inexpensive purchases, such as gasoline, movie tickets, or meals out.
Also, we can’t stress enough that you need to make the payment on time. Even one missed payment can knock your credit score down by 100 points. This could be the difference between getting a loan approved or not.
But, after making consistent payments, don’t close the credit card! the length of time you’ve had your credit card open also plays a part in your credit score. Close the account and your credit will undoubtedly drop.
Don’t Apply for Numerous Accounts
Do all of these credit card options sound superb to you?
Unfortunately, applying for multiple credit cards isn’t a good idea, even if you know you can juggle a few and pay off all of them.
This is because every time you apply for a credit card, your credit score takes a small hit.
This is only going to set you two steps back. Instead, put your energy into building up excellent credit on one card.
Get a Cosigner
Don’t like the idea of the above three options, and just want to skip right to getting an unsecured card?
Well, if you have someone willing to cosign for you (cough, Mom, Dad, cough) then you have the option of getting an unsecured card right away.
However, make sure this person knows they are on the chopping blocks for any payments you miss.
Become an Authorized User on Someone Else’s Card
Another way to employ some help with building your credit score is to become an authorized user on someone else’s account.
This way, you’ll be able to build history without being legally obligated to make payments.
However, the primary holder (most likely a parent or significant other) will probably expect you to pay your share, so make sure you work out an agreement with them beforehand.
How to Build Credit Fast: Conclusion
With these tips on how to build credit fast, you should have an awesome score in no time.
After about 6 months or so into the credit building game, you’ll want to check your progress by viewing your credit report and score.
This will help you assess how you’re doing and how much more progress you need to make before applying for a big loan or mortgage.
Got questions about how to build your credit fast? Drop us a comment below.
Get Control of Your Credit With Our Free Ebook
* indicates required