No Credit History? No Problem

/ BY / Credit 101

One of the determining factors in determining your credit score is your overall credit history, or the length of time you've had credit in the forms of a credit card, loan, or other unsecured debt. In fact, 15% of your credit score is determined by your length of credit.

If you have little or no credit history, your score tends to be lower and lenders are more apprehensive about loaning money simply because they have no way of telling whether you will pay it back or not. However, this makes it harder to even obtain a credit history—without a credit history, it's difficult to get credit, but without credit, you can't get credit history.

Luckily, there are plenty of ways to build up your credit history without having to resort to a high-interest loan or credit card. A few easy steps to building up your credit include:

Credit Cards for Newcomers

Capital One offers several credit cards designed for those with limited or no credit history. Anyone of the Capital One cards reports to the three major credit bureaus so it may help you establish credit if you pay your bills on time every month.

Bank Credit Cards

The first place to go for credit history is your bank. Because you already have an established financial relationship with them, they may be able to offer you a credit card with a lower limit or a special card for first-time cardholders.

Secured Credit Cards

Secured credit cards are one of the easiest types of credit cards to get and are popular for those rebuilding their credit or trying to establish credit. This type of card offers you credit in exchange for collateral in the form of a deposit. Your credit is a percentage of the deposit, usually between 50 and 100 percent. Like any other credit card, you make payments on your card each month, which helps you develop a good credit history.

Department Store Cards

Department store cards are usually not a good idea—they have higher interest and penalty rates than most cards and offer virtually no rewards. However, they are usually much easier to obtain than traditional credit cards and can help you build your credit history.

Authorized User

You can also establish credit by becoming an authorized user on another person's account. This requires a great level of trust and communication, however. If you opt for this route, make sure you are adding your name to someone who pays the bill on time each month or make arrangements to pay it yourself. You should also establish spending limits. The point here is not to have a line of credit available to you, but to establish your own credit history.

Keeping Credit Scores Up

Once you start to develop a credit history, it's crucial that you keep your credit score up; after all, a credit history is not going to do you any good if it's a negative one. Keep your credit score high by following these guidelines:

  • Pay all bills on time. Just one missed payment could cause your score to drop by as much as 100 points, so make sure you pay the bill on time. Setting up automatic payments is an easy way to ensure your bill is paid on time.
  • Don't max out your credit. Keep credit cards at less than 30% of their limit; any more than that and your score will start to drop.
  • Pay off the balance each month. You can still establish a credit history if you make small charges to your card, then pay the balance off each month. This way, you avoid the high interest charges that are typically associated with newer cards.

Not having a credit history doesn't leave you without options. There are plenty of ways to establish a strong credit history that will allow you to build up your score and obtain additional credit in the future.

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  • Starla Bentley Apr 28, 2014 10:09:34 AM
    I'm going through the same thing. I own my own house its paid for I have three cars which are paid for of course. There not all brand new But they get me where I need to go. I'm getting ready to get married and were thinking about starting a business. I need credit for that people. Just because some of us work hard and pay off our Homes and cars and have money to pay for other things we Need. Sometimes people like us need credit to. Not only that if I had bad credit it would be easier to Borrow money.
  • james Feb 22, 2014 6:07:22 AM
    Total bologna. I an 49 yrs young and have never asked for credit... hmm now I apply for credit and denied credit because I've never needed credit. Raised with motto if you don't have cash to buy what you want you don't need it.. now I want to buy a house have almost 90% of the amount saved for the home I want to purchase and they still want credit for me to borrow 10% of homes value and no credit card company will let me have a card because i have no credit history on my report hmmm. How do you get credit if no one will give you credit? ? Totally feel penalizes because i never needed credit? That should be a reward not a punnishment . I guess i save the other 10% for home on my own.. ..why bother applying only to be turned down.. how and y do they not offer credit to those who don't need it? Totally disgusted with this credit card thing. I guess. Only words I can come up with..

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