How to Build Credit When You Have None
1. Open a secured credit card
One of the easiest ways to build credit when you have none is to open a secured credit card. Secured credit cards require a cash deposit, which serves as collateral in case you don't make your payments. The deposit is usually equal to your credit limit, so if you put down $500, your credit limit will be $500.
Using a secured credit card responsibly can help you build credit over time. Make sure to make your payments on time and keep your balance low - ideally, you should aim to use no more than 30% of your available credit.
2. Become an authorized user
If you have a family member or friend with good credit, you could ask them to add you as an authorized user on their credit card. As an authorized user, you'll get a credit card in your name, but the primary cardholder is responsible for making payments.
If the primary cardholder has good credit and makes payments on time, becoming an authorized user could help you build credit. But be aware that if they miss payments or use too much of their available credit, it could hurt your credit as well.
3. Take out a credit-builder loan
A credit-builder loan is a type of loan designed specifically to help people build credit. With a credit-builder loan, you borrow a small amount of money and make monthly payments until the loan is paid off. The lender reports your payments to the credit bureaus, which can help you build credit over time.
4. Get a co-signer
If you're having trouble getting approved for credit on your own, you could consider getting a co-signer. A co-signer is someone with good credit who agrees to take responsibility for the debt if you don't make your payments.
Having a co-signer could help you get approved for credit you wouldn't otherwise qualify for, but be aware that if you don't make your payments, it could damage your relationship with the co-signer and hurt both of your credit scores.
5. Pay your bills on time
Even if you don't have any credit accounts yet, paying your bills on time can help you build credit over time. Certain bills, like rent and utilities, may not be reported to the credit bureaus by default, but you can sign up for services like Experian Boost or RentTrack to have these payments added to your credit report.
6. Monitor your credit report
Once you start building credit, it's important to monitor your credit report regularly to make sure everything is accurate. You can get a free copy of your credit report from each of the three major credit bureaus - Experian, Equifax, and TransUnion - once a year at AnnualCreditReport.com.
Check your credit report for errors, like accounts that aren't yours or payments that were reported late when they were actually on time. If you find any errors, dispute them with the credit bureaus to have them removed from your credit report.
Building credit when you have none can take time, but it's worth the effort. With responsible credit habits and a little patience, you can start building the foundation for a strong credit score that will serve you well in the future.