How to Build Credit With No Credit History

Quick answer: You can try joining a credit union, signing up for a starter credit card, getting a credit card through your current bank, applying for a secured credit card, becoming an authorized user on another person’s account or taking out a credit builder loan. Make sure to check your credit score and credit report for a complete picture of your current credit.

The best way to build credit over time is to make your payments on time over the years. Payment history accounts for the biggest impact to your credit score. But if you’re wondering how to start building credit when you don’t have any payments to make, check out some of the best practices below.

The best way to build credit over time is to make your payments on time over the years. Payment history accounts for the biggest impact to your credit score. But if you’re wondering how to start building credit when you don’t have any payments to make, check out some of the best practices below.

1. Join a Credit Union (Best)

You can often open a checking or savings account—or both—at a local credit union without any credit history. After a year or less of building a good rapport with that financial institution, demonstrating that you can handle your accounts responsibly, and saving a little money in your accounts, you can apply for a credit card or small loan with the credit union. 

Credit unions are more likely to take a risk on account holders in good standing, even if you don’t have a lot of credit history. By managing these small loans or credit cards responsibly, you can build credit for the future.  

2. Starter Credit Cards

Credit cards are a common credit entry point for people. When you’re considering credit cards, look for a card you’re likely to get approved for that offers the best perks you can get. It’s tempting to go for cards that offer lots of cash back or travel rewards. While those rewards might be nice, these types of cards often come with a hefty annual fee. If you’re just starting to build credit, you may want to avoid that. 

3. Get a Credit Card from Your Bank

Just as a credit union might be more likely to take a risk on you, your bank might be willing to approve you for a credit card. This is especially true if you’ve been a responsible checking or savings account holder for some time.

Do pay attention to interest rates, though. A high-interest-rate card from your bank is not better than a lower-interest-rate card with someone else. When possible, look for a card that offers an introductory 0% APR for a year. This can help you practice using credit without incurring a lot of interest expense in the process.

4. Secured Credit Card

While we did say to avoid annual fees on credit cards when building your credit, there are some exceptions to this rule. You may find that you have no other options, and in this case, a secured credit card can help you start your credit profile.

These cards require a deposit up front that secures your initial credit limit. This amount is typically as low as $250 to $300. As you build credit with such a card, you can usually apply for a better card and eventually get your deposit back.

I Can’t Get Approved for a Credit Card

If you find that you’re denied for any credit card you apply for, even secured cards, pull your credit reports. You may be surprised that the problem isn’t a lack of credit but a serious negative mark on your credit report. 

Knowing what’s on your credit report that’s driving your score down or causing credit denials is important. You can proactively work to fix those issues or dispute the item if it’s not accurate.

5. Become an Authorized User

If you have trouble getting a credit card of your own, consider becoming an authorized user on someone else’s account. If someone you trust who manages their account responsibly will add you as an authorized user, you can “piggyback” off their timely payments. Make sure that the credit card company in question does report account information to the bureaus for authorized users; otherwise, there’s no point to this option.

6. Credit Builder Loan

You don’t need a credit card to build new credit. Credit builder loans are similar to secured credit cards. You deposit enough to secure the loan balance. The deposit you make is held in a locked savings account until you pay off the loan. Then, you get the balance back.

This isn’t a way to get a loan for something you need right now, as you have to have the cash to get the loan. However, it can be a way to demonstrate responsible account management and build credit history.

7. Credit Building App

Credit-building apps such as ExtraCredit help you understand your credit history and score. They can even provide recommendations for credit cards, loans and other products that might be a good match for you so you can apply and build your credit.

What Credit Score Do I Start With?

No one has a credit score of zero. The credit score ranges from 300 to 850. 

Why Don’t I Have a Credit Score?

It’s possible not to have a credit score at all, though. The credit scoring models require a certain amount of information to score your credit history. If you don’t have credit history, have only had one account for a short period of time or haven’t had an open credit account in a while, you may not have a credit score.

To avoid having no credit score as a young adult, you may want to start considering ways to build a credit history.

Things You Shouldn’t Do to Build Credit

You might have heard some myths about building credit that aren’t true. Here are the real facts about a few common ones:

• Don’t sign up for retail credit cards. Some people might say that retail credit cards are easy to get and can help you build credit. The problem is that not all retail credit cards report payments to all the credit bureaus. On top of that, they don’t offer you the flexibility of spending that can be beneficial with a credit card.
• Avoid carrying debt month to month. One piece of especially bad advice you might hear is that you have to carry a little bit of debt over on your credit cards to improve your credit. This is simply not true. Using your credit card for items you would have purchased anyway and paying off the entire balance each month to avoid interest can still help you earn a good history of timely payments. 
• Don’t avoid checking your own credit. If lenders check your credit to evaluate you for a loan or credit card, your score can take a small hit. However, that’s not the case when you check your own credit. Check it monthly, weekly or daily without any impact.

The Best Thing You Can Do to Build Credit? Have Good Finances

Missing payments or paying your bills late isn’t good for your credit. So, creating a workable monthly budget and sticking to it so you can make all your bill payments on time is critical to building good credit. As you do the work to build good credit, you can get better loans and credit cards, saving money on interest. You may also find you have more financial opportunities, making it easier to continue managing your money well.

Article updated. Originally published June 3rd, 2014.

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