Unfortunately, credit is something that you just can’t live without these days. If you want to buy a house, for example, unless you’re Warren Buffet you’ll need to have a solid credit profile. If you’re young and want to get a loan for a car, you can’t do it unless you already have a credit history. If you don’t have credit and are applying for your first job after college or getting your first apartment, again you’re going to need some credit history.
However, in order to build credit, you need to have credit in the first place. It’s a catch-22 that a lot of borrowers are faced with. So how do you build credit when no one is willing to give you a chance? Follow these 7 easy ways to build a stellar credit history.
Become an authorized user on a relatives’ credit card. It’s a great way to start your credit history. Once this is done, the credit card shows up on your credit report. This means you inherit the age of the account, the payment history and the credit limit.
If the person you make the request of is hesitant about adding you to their card, reassure them that you only need to be added to the account – you don’t actually need a card. This way, you’ll improve your credit and the owner of the account risks nothing.
Some credit card issuers do not report authorized users to the three major credit bureaus, Experian, Equifax and TransUnion. Before opening up an account, call the credit card company and ask them if they report to all three credit bureaus.
Find A Co-Signer
When you don’t have credit it’s downright impossible to qualify for a loan. But if you find a cosigner with good credit you’ll surely be approved. The hard part is finding a willing family member or friend to help you out.
The reason it’s difficult to find someone to be your cosigner is because when you use a co-signers’ credit, they become responsible for the payments, not you. If you miss a payment, you’ll end up ruining their credit and your relationship with them. So take this commitment seriously.
Apply For A Secured Credit Card
Credit cards are an easy way to build credit. But you probably won’t qualify for a credit card if you don’t have any credit to begin with. That’s where secured credit cards come in to save the day.
A secured credit card works like this. You first have to make a cash deposit into the account, as collateral. The amount you deposit then becomes your credit limit. The banks let anyone have a secured credit card because there is no risk to them. If you stop making your payments, they’ll simply keep your deposit and close your account.
The card works just like a regular credit card and shows up on your credit report. If you use this card responsibly, the credit card company may upgrade your secured credit card to a regular credit card once you’ve built up some credit history.
Diversify Your Debt
The types of debt you have in your report account for roughly 10 percent of your FICO score. That 10 percent can have a huge impact on the way lenders view your creditworthiness, especially if there isn’t a lot of other information in your profile for them to go by.
So while having a credit card is important to building your credit, just one credit card isn’t going to get the job done. You’ll also want to add a student loan into the mix and a car loan as well.
How do you get these other types of loans with no credit you ask? Well it’s very easy to be approved for a student loan. You also don’t have to pay it back until you’re done with school. As far as a car loan goes, you can get a car loan even with no credit history if you put a solid down payment for the car and have a steady job.
Ask Your Bank For Advice
If you’re hitting a brick wall when it comes to getting started on creating a credit history, ask your bank what to do. They may have several options at their disposal.
If you have had a checking account at your bank for a while with a good history, they may offer you a credit card with a small credit limit or even a personal loan to get you started.
Consider Store Cards
The bad part about getting a store credit card is that they often times carry a high interest rate and they have yearly fees. But there is one good thing about store credit cards – they’re easy to get. If you don’t have much credit history, take out a store card and slowly build your credit history while shopping for the things you would buy anyway. Just be sure and pay off the balance entirely every month so you don’t accrue nasty interest charges.
Ask Lenders To Report
Making late payments can have adverse effects of your credit. In a perfect world you would make timely payments on your bills and companies would then tell credit reporting companies that you’re an awesome borrower. But not every company reports your monthly payments.
If one of your monthly obligations isn’t showing up on your credit report, you can ask the credit bureaus to add it for you. If that doesn’t work, you can ask the service provider to do it. Even your landlord may report your rent payments to the credit bureaus. You might strike out in this respect, but it doesn’t hurt to take a swing at it.