Credit is everything in the US. If you don’t have any credit, it makes it difficult to take out a loan, get a credit card, and even rent an apartment. So, what do you do when you don’t have any credit? The good news is that there are options. The bad news is that you can’t build a solid credit history overnight, so you need to make a plan and stick to it. Here are some ways to get started.
Apply for a Secured Credit Card
One of the easiest ways to build your credit is by applying for a secured credit card. You make a cash deposit upfront into an account, and the amount typically becomes credit limit. Secured credit cards act like any other credit card, the only difference is that your money guarantees your credit instead of the lender’s. Once you build up credit, many lenders will allow you to convert your card to an unsecured credit card.
Be an Authorized User on Someone Else’s Credit Card
Teenagers, as well as adults, can become an authorized user on somebody else's credit card account (teens are typically added to a parent’s account). When you’re an authorized user, your name is added to the card holder’s account, and the account activity (payments, available credit) can establish their credit history and boost their credit score.
Get a Cosigner
Having someone cosign a loan is another way for you to build credit. A cosigner typically has to have good credit as well as an established credit history. Unless you’re married, they’ll also have to meet the lender’s income, debt-to-income ratio, and payment-to-income ratio requirements. It’s important to note that the cosigner also must understand the potential risk. If you don’t make the payments, their credit will be negatively affected too.
Utilize Rental History
Your rental history on an apartment can be used to build credit. Rent-reporting services such as Rental Kharma and RentTrack report your monthly payments to all three credit bureaus. It’s important to note, however, that many of these services, including Rental Kharma, charge a fee in order to use them. Check with your landlord to see if they already use, or allow you to sign up for, one of these services.
Apply for a Credit-Builder Loan
Another option is a credit-builder loan. With this type of loan, you don't actually get the money. Instead, you deposit your monthly payments into an account that is held by the lender. When the loan is repaid, the funds are given to you. This helps establish your credit because the lender reports your monthly payments to the credit bureaus. These types of loans are usually offered by credit unions and smaller community banks.
Your credit score and history determine a lot of important things in life. It’s very difficult to get by without any credit, and it’s important to build a credit score. If you're struggling with credit and need a car but aren't sure where to begin, Auto Credit Express can help. We connect buyers with dealerships in their local areas who specialize in working with many types of challenging credit situations. To get started today, fill out our free and easy auto loan request form.