How to Build Up Credit When You Don’t Have Credit History

While some people have too many of those plastic devils — better known as credit cards — at their disposal, there are others who don’t have any. And because of their lack of credit history, their credit scores aren’t as high as they’d like, which causes them to be denied major credit cards, auto loans or mortgages.

Sounds silly, right? You obviously have such great control of your finances that you don’t need to put anything on credit, ever. Yet you don’t qualify for loans because you have little or no credit history. Instead, you need to prove to lenders that you can be responsible with loans and credit cards, too. Try some of these tips to build your credit history and get your credit score heading upward.

The Basics

Open Checking and/or Savings Accounts. Don’t hide your money under the mattress or live paycheck to paycheck. Creditors will want to see that you can manage your cash before they’ll trust you with credit. This is also a good idea for minors who don’t have a speck of financial history and want something to build on.

Check Your Credit Report. The three major credit bureaus — Equifax, TransUnion and Experian — are each obligated to provide folks in the United States with one free credit report per year through Check the report to make sure all information pertains to you, because sometimes others’ credit adventures can get mixed into your history. This sometimes happens when there are seniors/juniors in your family, or if another person has the same name as yours. Worst-case scenario is that someone has stolen your identity; identity theft is a real issue. Dispute any items with the specific credit bureau to try to “clean up” your information.

Getting Credit

Start Small. Apply for a store credit card, which is considered a revolving account in that it has a credit limit and requires a minimum monthly payment each month. But be aware that if you get one of these store cards, the interest rate will likely be sky-high and the credit limit pretty puny. But it’s a foot in the door!

Apply for a Secured Card. This is a credit card that works differently than the traditional kind. In most cases, you can get “credit” by putting down a deposit with the lender, and you can only charge up to that amount. It’s best to apply for a secured credit card at a bank or a credit union in order to be sure you won’t get scammed.

Use Revolving Credit on a Regular Basis. There’s no need to put everything you purchase on the plastic — charging small purchases once in a while will keep your account active and show the lender that you’re responsible with your credit card. Be sure to pay them off in a timely manner, and your excellent repayment history will be reflected on your credit report.

Associate Yourself With Someone Else’s Credit. No, not through identity theft! Ask if a parent, sibling or other family member will add you as an account holder on one of their credit cards, or will co-sign on a loan that you wouldn’t otherwise qualify for. But be aware that any credit faux pas you make (missed or overdue payments) will reflect negatively on BOTH of your credit reports.

Try For an Installment Loan. These are for the bigger loans for school tuition, car financing and mortgages. Obviously, I’m not advocating for anyone to run out and buy a house or a car just to boost their credit. But if you’re in the market for a new car and need financing, see if you can qualify for the loan.

5 comments to How to Build Up Credit When You Don’t Have Credit History

  • So frustrating how cryptic the whole credit history and credit score is. The one thing I’ve learned related to credit scores for once you DO start getting credit cards is that, if you have a credit card and don’t have some crazy annual fee, don’t close it even if you don’t use it. Multiple credit cards is great for your credit score since you have more credit available. This will help you build your score. Just don’t get lose in your credit cards and forget to pay them off!

  • Can’t you have a personal interview with an underwriter if you have a good payment history–rent, utilities, and a lot in savings and no debt, but no credit history?

    Also, about checking your credit score: you don’t get a free credit score from do you? I’ve only ever gotten free credit reports.

    • Nicole

      @Lindsay: I made a typo on the bold part — should be credit report, not score. The information afterward pertains to the report. Unsure about the underwriter bit.

  • It’s funny how much you have to play the system to get it back up! Some great tips here.

    I plan to never use credit again so I have no idea what will happen to my credit score! Could cause me problems renting and things in future!

  • […] This post was mentioned on Twitter by Nicole Canfora Lupo, Team DINKS. Team DINKS said: You gotta start somewhere! -> RT @RainyDaySaver How to Build Up Credit When You Don't Have Credit History […]