Credit Reports & Ratings Articles

No Credit History - Here is How You Can Establish One

It may seem like one big circle when trying to establish a credit history. If you don't have any credit then it is hard to get credit. If you want to make a major purchase like buying a car, or home, or even try to get a rental home, you need to have good or decent credit. There are a few things that you can consider doing when trying to establish your credit history.

The thing most commonly done first is to apply for a credit card. As this would seem like the first thing you want to do, it might be the last. Most credit card companies consider having no credit as bad as having poor credit, so the chances of getting a credit card with no credit history are sometimes unlikely.

The first thing that anyone should do is set up a checking account, and a savings account would help too. After you have had a bank account with a good history then you can apply for a credit card through your bank. The bank will look at your account history as well as your employment and residential history. The bank will make sure that you are able maintain a job and if you have periods of unemployment. Also, the bank will look to see if you rent or own you home and how often you move. If you have utilities in your name that have been paid in full and on time every month then it will help in the decision on giving you a credit card.

Consider applying for a store credit card. Many will try to get you sign up with the initial rewards like 10% off your first purchase. As this may be enticing, the cards usually have extremely high interest rates and annual fees. There is, however, a good side to store credit cards if you use them properly you can gain good credit. Before signing up for the card, ask if they report to the credit bureaus, if they don't then it won't help in your quest to establish credit. What you want to do is make a small first purchase with the card, then make the monthly payments on time and in full until it is completely paid off.

Another way to go would be to apply for a secured credit card. This is another type of credit card but the terms are a little different in that you are required to make a deposit. You give the money to the lender before receiving your credit card and how much you put down is how much your credit limit will be.

Sometimes credit cards and store cards are not the best way for someone to go. In that case, you can think about getting a joint credit card account or added onto an account owned by someone who already has a good history (usually a spouse, family member or relative). You can also apply for a small personal loan that is co-signed. With this option, however, you must make sure to make every payment on time until it is paid off in order to maintain a good credit history.