Are you currently trying to build credit from nothing, but don’t know how? I have had a number of friends that thought they were doing the wise thing because they never fell into the temptation of getting a credit card and therefore never got into any debt. However, when the time came for them to buy a house, they ran into major issues because they didn’t have any credit history.
I urge you not to be like my friends. While it may be difficult to build credit from nothing, it most certainly is possible to do. After all, it’s something we all have to do at some point in our lives as so many institutions care about our credit scores.
Start Building Credit With a Credit Card
I know it might seem counterintuitive to many, but building credit from scratch generally requires getting a credit card. When you choose to get the card will depend entirely on your given situation and circumstances. You can start as simple as getting a student credit card where your parent is also on the account or getting your own card while in college. Again this is going to depend on what your given situation is.
Thankfully credit card companies aren’t allowed to target college students illicitly any longer, but college or very soon after is likely when you would generally start thinking of building your credit – if you’ve not done so already. Generally speaking, you’d want to make sure you have a job and use the card sparingly while paying it off each month. By following this pattern, you’ll show the card companies that you’re somewhat trustworthy and allow you to start to build credit.
What if You Can’t Get a Credit Card?
For whatever reason, some people just can’t get approved for a credit card. If this is your struggle, then the last resort option is a secured credit card. There is usually some sort of fee for this sort of card, but if you are having trouble building your credit, then this could be your only option and the fee is likely worth the cost in the long run.
Simply search for a secured MasterCard or Visa through their sites and pick the one that suits you best. You can then preload money onto this card and use it as you would a regular credit card. The limit on a secured credit card is usually the amount that you preload onto the card, though it can vary on occasion. Start with a manageable amount and use the credit card wisely while also handling it responsibly. After some time this should be able to allow you to start building credit at which point you can get an unsecured credit card and stop using the secured one.
Pay Your Bills
Some people have trouble building credit from nothing because they were not responsible for any bills while they were living at home. Either that, or you just reimbursed your mom and dad for bills that were yours, but came in under their name. One of the classic examples of this is your cell phone bill.
If you are interested in building credit, then it is in your best interest to get that bill put into your name. By paying this bill on time each month, you will be boosting your credit score and establishing a reputable credit history
Pay Your Bills On Time!
Your credit score is made up of a number of factors, but the key factor is your payment history. In fact, it makes up 35% of your credit score and thus very important if you’re looking to build credit from scratch. The last thing you want to do is have a bill and forget to pay it. That missed payment will be reported to the credit reporting agencies and thus negatively impact your score.
If making timely payments on your bills is a challenge, then do what you can to remind yourself. You can go as simple as marking your calendar to setting a reminder on your phone. Heck, many service providers even provide free text alerts to let you know when a bill is due.
What do you think is the biggest challenge in trying to build credit from nothing? What did you do when first establishing yourself to build up credit?
Photo courtesy of: sovietmole
*This post was featured on 2 Copper Coins