It is challenging to get a loan if you do not have any credit history. People who are beginning life now after finishing school may not have any credit records since they have not worked anywhere. If you have been a student, you probably have been depending on your parents or guardians to pay school fees. Later in this article, you will learn how to build credit fast with no credit to begin your financial life at a high note.
One of the challenges one can face without a credit record is the failure to access credits from various financial institutions. There is no single bank that would like to give a loan or credit to someone they are not sure whether he or she will pay back or not. Although most people beginning life are lucky to have some assets such as land and houses that they can use to access loans, most are still struggling to start life from scratch.
Despite all the above, there is still hope as some financial institutions can always give first-time personal loans no credit history to people who are beginning life, maybe after schooling or from previous lack of financial services accessibility. If you fall into that category, then you can start smiling as the good news is still on the way. You may not need a cosigner to get any loan in the near future anymore. To achieve that, there are various things you will need to observe.
How Can I Build Credit Fast With No Credit?
If you have been wondering how you can build your credit score from scratch, then there are various ways applicable to someone like you. Look at the following things you should do today.
Acquire a store card
Various shops and service centers give credit cards so that you can be buying goods using the card instead of using cash. Such stores include supermarkets, fuel stations, restaurants, among many others. Amazon, one of the famous online stores, gives out an Amazon Store Card so that you can buy goods from them without the need to have cash.
Apart from reporting your credit card usage and payment history, the card also earns you 5% cash backs on all purchases you make at Amazon.com online shop. It is an excellent card to start with since they are not concerned with your credit records.
Another similar card is the Firestone Credit Card. Having this card and regularly using it at Firestone stores to buy tires or other related products can raise your credit to considerable limits. Apart from reporting your credit score, the company will also offer you specialized; financing when you hit a target of $299.
Apply for a secured credit card at your favorite financial institution
Secured credit card is a type of credit card that requires you to make deposits before you get the card. Such deposits act as collateral to the amounts you borrow. Secured cards can help you to grow your credit limits with no time as long as you pay your credit debt on time.
Secured credit cards are very suitable for credit cards for people with no credit. Since you have to pay collateral, there is no need to ask about your previous debt payment history.
The only disadvantage with secured credit cards is that you have to deposit money to get a credit limit. The challenge comes in when you cannot get the required amount of money to pay a deposit. Above all, if you utilize the credit card correctly, then you can increase your credit very fast.
Find a cosigner when getting a loan
A cosigner is a person who stands by your side when taking a loan. If you have no credit history, you can get your parents or any relative to act as a cosigner when seeking loans. He or she promises to pay the amount you borrow if you fail to pay as agreed quantity.
Upon getting such a loan, ensure that you pay early as per the terms and conditions. Do not wait until your consigner pays for you. If anything, you should talk with your cosigner to give you the money so that you can pay for yourself.
With time, your credit score increases, and thus you can stand on your own. Your bank can even give you more loans as they have enough confidence in you.
Get a credit-builder loan
You can get a credit builder from your bank if you already have an account with them. Make sure that you take a loan that you can repay with time. Taking huge loans can sometimes become a burden if you face other financial requirements that are difficult to avoid. The most important of all is to utilize the loan well to avoid paying for a loan with no benefit out of it.
Become an authorized user on someone’s person’s credit card
It is possible to become an authorized user of someone else credits card if they allow you to do so. You become responsible for all credit card transactions. When you make purchases and repayments for the card, all the credits go to you because you are the user. With time, you can get a good credit score.
One thing you should note about this card is that if you fail to repay the credit card debt on time, it is you who spoil your credit report, not the actual owner of the card. With that in mind, you should ensure that you always observe the due dates to the latter.
Consider a student credit card
When you begin building your credit score while still a student, you can help you increase your scores so that in the future, you can enjoy good credit records.
Report rent and utility payments to credit bureaus
You can request your parent or guardian to give you some of the bills to pay if you have just begun working. These include electricity, water as well as internet bills. Make sure the companies concerned report your payments to the credit bureaus.
Make on-time payments every month
One of the most significant spoilers of someone’s credit report is the late payment of loans and credit debts. Delaying to pay for 30 days, 60 days, and so on can easily affect your credit score adversely. Being late by 30 days can be more harmful than someone who has stayed for 90 days after the due date.
In short, recent loan defaults are more dangerous than very old ones. However, do not let it go far as your bank can take you to collection agencies where you can find yourself more harmed financially.
Collection accounts can go for several years underrated even after settling your debts. That is why you should make up a follow up with the collection companies to close all available collection accounts on your name. Early payment of debts is a sure way on how to improve credit score in 30 days.
Don’t use too much credit
Any credit card you get has a limit. Make sure that you spend below the threshold. That way, you will increase your credit score. If you spend all your available credit, it means that you are not responsible enough to manage your funds.
The bank might be reluctant to give you more credit since they get worried about whether you will be able to pay back or not. If you have a credit limit of $300, spend just about $150. Have the remaining $150 reach the next cycle. After all, you are trying to grow your credit, so why spend that much?
Avoid a lot of credit cards
Someone can have many credit cards to collect many scores due to the utilization of many credit cards. However, the practice can bring you troubles if some credit cards remain dormant. Moreover, if you fail to pay the debt to some cards, your credit score drops very fast.
Remember that you are just beginning your financial journey and only looking to create a good name with financial institutions. It explains why you do not need four, five, or more credit cards that you cannot manage properly. In my opinion, two credit cards are enough if you wish to have more than one card.
Check on identity theft
Do you know that some people can get your identity card and register bank accounts with your name? That is what we call identity theft. If the concerned person takes a loan or credit card and fails to pay, the concerned bank forwards your details to the main credit bureaus.
It follows that you are the one who was unable to pay for the card. It means you should learn to check whether someone might have used your identification card to open an account.
The best thing is to freeze your credit so that no one can access it. Anybody opening a bank account must have their credit checked. If you freeze your credit, no one will ever use your details to open a bank account or get a credit card.
Building your credit score is a good thing if at all, you have no credit history. However, you should be very careful to follow the terms and conditions of various mechanisms of credit building so that you do not mess up instead of helping yourself. After all, building your credit opens doors for future borrowing where you can apply considerable loans to make developments.