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4 Ways To Build Credit When You Have None


Your credit score is a direct reflection of your financial health. It offers lenders quick insights into how responsible you are for your credit. The better your score, the more chances you will stand to secure new loans and lines of credit. A higher credit score also means increased opportunities to tap into low-interest rates when you borrow.

It is always worthwhile to improve your credit score, as otherwise, you might struggle to find a place to live and purchase large items. The good news is that you can take a few easy steps to establish your credit and contribute to its positive growth. Here is how to build your credit score when you have none.

1. Get a Loan.

The first step to building your credit from scratch involves opening a small loan that you can pay back immediately or before the payment due date to boost your credit score. A few types of loans to consider include student loans and credit-builder loans.

Unlike private student loans, most federal student loans don’t require a credit check. So, you will get approved even if you don’t have credit.

Similarly, most banks, online lenders, and credit unions offer credit-builder loans to people who wish to build or rebuild their credit. In this case, the lender will hold onto the funds that secure the loan.

For instance, it will be deposited in a saving account until you pay off the loan instead of receiving the money when you take out the loan. The lender will keep a tab on your account status and monthly payments and help you build credit. Once you make all the payments, the funds will be released to you.

Another option is to find an online payday loan that requires little credit. Sometimes, cash advance or short-term loan servicers don’t check your credit score at all. Regardless of what type of loan you get, ensure the lender reports it to the credit bureaus. Additionally, the quicker you pay the total amount back, the better the boost to your credit.

2. Get a Credit Card.

Another option to build your credit score from scratch is to get a credit card, ideally a secured credit card. A secured credit card is backed by the cash deposit you make beforehand, and the deposit amount is typically the same as your credit limit. Generally, the minimum and maximum amount you deposit varies by card.

A few companies like Deserve, Jasper, Avant, and Petal even offer alternative credit cards without a security deposit.If a secured credit card is not your thing, you can apply for a normal one. Use the card to buy things, and make payments before the due date. Getting any amount and paying it back will be helpful in building your credit score.

While a few credit cards don’t demand high credit, be aware that some cards you qualify for may have higher interest rates because of your low credit. So, be sure you pay back the amounts you put on the card immediately.

3. Pay Your Bills on Time.

Your payment history is a crucial credit-scoring factor. The earlier you pay your bills like utility bills and car payments, the greater it will push your credit score.

Therefore, it is always ideal to have a system in place that reminds you when the bills are due and makes the minimum payment on time. For instance, you can sign up for automatic payments for your banking accounts so you don’t accidentally forget a payment.

Another tip to increase your credit score is to pay the bills using a credit card and immediately pay the credit card off. This way, you can get more credit for the payments. Nonetheless, only choose this method if you can cover all your bill costs.

4. Become an Authorized User.

If you face challenges getting a credit card of your own, you might want to ask a family member with a strong credit history to add you as an authorized user on their credit card.

As an authorized user, you stand a chance to receive a credit card in your name that’s associated with the account. The credit card company will then report your account’s information to the credit bureaus — adding your name to their databases.

This happens to be a great way to build your credit. However, be aware that it will affect both you and the other card user’s credit if you miss payments. Therefore, having a good understanding of what is and isn’t allowed to be charged on the card is also essential.

5. Watch Your Credit Scores and Reports.

Improving your credit score is crucial, particularly if you plan a big purchase in the near future. It can take several weeks to several months to see a significant impact on your score after you start taking steps to turn it around. But don’t lose heart and stick through.

Additionally, don’t forget to review your credit scores often. It will offer you valuable insights into how you handle your credits and the errors you should avoid.