5 Ways to Build Credit with No Credit History

Everyone gets to or is forced to the point when they must leave the nest. It is time to go out into the world and start creating a life. Unfortunately, we are not always prepared for the fact that most large purchases like cars and homes require us to have a credit history. This is not something that can happen overnight. It takes time to build it to the point of having it be beneficial when making purchases that require credit. However, you can do a few things to start building your credit. And there are some things parents could do to better prepare their children for this crucial step into adulthood. Whether you are in this situation or trying to help a child, look into these five ways to build credit. 

Credit-Builder Loan

Those who need help figuring out where to start should head to their bank to see if they offer credit-builder loans. While it is called a loan, it is not truly a loan. They are more of a savings account designed to build credit. Once getting a credit-builder loan, the money will be put into an account. The individual will then make monthly payments. These are reported to the credit bureau. This action is what will build the credit history and credit score. Once you have paid off the loan amount, the money is yours, and the information needed to create a credit score will be available. This option could be presented to teenagers/young adults as they are preparing to go out on their own. It can be a safe way to build credit. 

Store Card

Getting a store card is one safe way to start building credit. Most retailers will offer you a store card. They also have them at gas stations. The stores are hoping the card will motivate customers to spend more. Don’t fall into this trap. To use it to build a good credit history, pay off the balance each month. Leaving a significant proportion will not be beneficial. A gas card is a great option, as many dislike overspending at the pump. You only want to use a store card for things you would buy using cash or a debit card. Something that you already have the income to pay for. Also, look to make sure they report to the credit bureaus. This is a needed step if it is to build your credit. 

Co-Signer

The option of using a co-signer is one that should not be taken lightly, as both will be liable. If you have someone with good credit willing to co-sign a loan with you, you repay the borrowed money, which will build your credit score. However, if the borrowed money is not repaid, it will damage both your and the co-signers credit scores. A co-signer is usually someone you are close to, like a parent or other family member. Someone that trusts you to make the payments and make them on time. Co-signing a loan is not possible for everyone looking to build their credit. 

Authorized User

A slightly less risky alternative is to become an authorized user on a credit card. The primary cardholder would be liable to pay, but you could build credit being attached. This method gives the primary cardholder more control. This is an excellent option for parents. It can be a tool to help teach children how the financial world works. And it will also build their credit. The drawback is creating boundaries on how much they can spend, as the cardholder is responsible. Another situation that fits well with this method is a partner or spouse with no credit. 

Report to Credit Bureaus 

Without a credit history, it will be hard to buy a home, which means most in this situation will be renting. There are numerous rent reporting services you can utilize. Rent is usually the most significant bill each month. And if paid on time, it can help shape your credit. Other bills you can look into are your utilities. Find out from the phone, water, gas, cable, and electric companies if they report to credit bureaus. Again, paying on time is essential to have it benefit your financial status. 

We all need a credit history to build the life that we want. Don’t waste time. Do all that you can early on to give yourself a boost. Building a high credit score will take time to happen.