How To Establish Credit With No Credit History

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How To Establish Credit With No Credit History

One of life’s great catch-22s is credit. Assume you just graduated from high school and are looking for your first credit card. You patiently complete the application form and wait for a response from the issuing bank, only to learn that you’ve been refused. Why? You don’t have any credit history.

But how does one go about establishing a credit history? Of course, you receive a credit card. It’s a difficult situation, but there are a few simple and low-cost actions you may take to build your credit history.


  • If you want to start building a credit history, first check your credit report to ensure you don’t already have one.
  • Consider applying for a secured credit card, a card via your bank, or being added as an authorized user to someone else’s credit card to develop your credit history.
  • Once you’ve begun to build a credit history, maintain it by paying bills on time and without allowing your credit usage ratio to get too high.

What Is Established Credit?

Your credit history is your credit history, which gauges your capacity to repay loans and your accountability in repaying them. Your credit history is documented in your credit report, which includes the number and type of credit accounts you have, the length of time each account has been open, the amounts owed, the amount of available credit used, whether bills are paid on time, and the number of recent credit inquiries from potential lenders. 1

To develop a credit history, everyone must begin somewhere. The following are the measures to take:

Review Your Credit Report

First, get a free copy of your credit report to ensure that you genuinely have no credit history. You may be startled to learn that you have a credit history because of a gym membership or a college loan. It may only be for a short time, yet it may be all you need. 2

If you’ve just been turned down for a credit card or loan, you have the right to a free copy of your credit report from the credit bureau that the lender used to check on you. Equifax, Experian, and TransUnion are the three main credit bureaus. Even if you haven’t been denied credit, you may request a free copy of your credit report from each of the three agencies at least once a year. This may be done by visiting the official website, 3

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Your credit score is not included in your credit report. Some organizations may charge you to find out your credit score, but you can obtain a good estimate by utilizing one of the free internet credit score estimator tools. If you have a credit card, the issuer may offer your credit score for free.

How To Build a Credit History

“Sin creates history. “Goodness is deafeningly quiet.” 4 Unfortunately, Johann Wolfgang von Goethe’s famous words frequently ring true in the world of credit reporting. While it may seem that having no credit is a positive thing since it shows that you’ve been financially stable enough to pay cash for every transaction you’ve ever made, lenders want assurance that if they lend you money, you won’t take it and go.

If you’ve concluded that you don’t have a credit history, or that the history you do have isn’t enough to get you accepted for a typical credit card, here are several alternatives:

Get a card through your current bank

You may not have a credit score, but having a checking account with a bank may help you be accepted for a credit card. You might be able to get a secured credit card at the very least. A secured card requires you to retain a set amount of money on deposit, which acts as your card’s credit limit. A secured credit card’s credit limit may not be particularly large, but it will get you started on the path to building a credit history.

You should be able to receive a regular, unsecured credit card if you’ve built a strong track record with that card. 5

Another possibility is to get a modest secured loan from a bank and repay it over time. However, unless this is your sole alternative, it is a waste of money. You’ll have to pay interest on that loan, and regardless of how low the interest rate is, why should you pay to borrow money you don’t really need? You may prevent interest charges on a secured card by paying the payment in full each month. 6

While debit cards resemble and work similarly to credit cards, they will not assist you in establishing a credit history.

Get added as an authorized user

If you have a spouse, parent, sibling, or close friend who has a credit card with a lengthy history of 100% on-time payments, a large limit, and a perennially low or paid-off amount, ask them if you may be added as an authorized user. This allows you to profit from their excellent credit practices.

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Make sure this is someone you can trust to maintain a stable payment history and that they can trust you not to build up a debt on a card they’re ultimately accountable for. If they are concerned, they may just retain the card. You still profit from their credit history, and they are not required to take on the risk.

Apply fora store credit card

Major merchants’ store credit cards often have more relaxed approval conditions. These cards often come with a sign-up offer, such as 10% off your first purchase.

So, the next time you need to purchase anything from your favorite retailer, think about using their credit card offer to assist develop credit. Just make sure you have enough money to pay the bill in full when it comes, since retail credit cards often have quite high interest rates. 7

Finance a store purchase with an interest-free offer

Stores often let you buy products on credit, especially during the holidays, with a “same as cash” offer that carries no interest for a specified amount of time—usually 90 days. Because this is a loan, if you pay on time, it might help you create excellent credit. Pay it off fully before the authorized term ends to avoid incurring interest or hidden costs.

Offers like this can be found both in stores and online.8

How To Use Credit Once You Have It

Once you have credit, monitor how you use it to maintain your credit score high. That involves paying your payments on time, not applying for too many different types of credit in a short period of time, and keeping your credit usage ratio low by not carrying a load that is close to your credit limit.

While it is not required, setting up autopay as soon as you create the account and ensuring that it is configured to pay down the bill amount every month can set you up for great financial success. If you can get into the habit of paying off all of your bills regularly, you might save hundreds of thousands of dollars in interest over the course of your life.

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Keep in mind that the amount of time your accounts have been open is one of the elements that goes into your credit score—the longer the better. Even if you prefer to pay cash for purchases, just having your credit card account active might assist you in achieving and maintaining a good credit score. 1

How Do Student Credit Cards Work?

Major lenders such as Bank of America, Discover, and Capital One provide student credit cards. They are an excellent way to develop credit if you are a student. They often provide reduced interest rates and financing to persons who have no prior credit history. They may also offer sign-up incentives, which may give you a set number of points that you can use to book a holiday or earn cash back. 9

Does Paying Off My Credit Card Each Month Hurt My Score?

Paying up your credit card in full each month has no negative impact on your credit score. That is a common misconception. Paying off your credit card in full each month saves you money on interest and may actually improve your credit score by lowering your credit usage percentage.

What Is the Easiest Way to Establish Credit History?

The simplest technique to generate credit history is to be added as an authorized user to someone else’s account that has a good track record. If you can’t locate someone willing to add you to their account, your next best alternatives are a credit card from your bank or a secured credit card.

The Bottom Line

A good credit score will not just assist you the next time you apply for a loan or a credit card. It may also effect your insurance prices and possibly your ability to rent an apartment or find work with certain businesses. So building a credit history will be worthwhile for years to come.

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