There are many ways to build credit if you have no history. Anyone who wants to establish a history of financial reliability needs to start somewhere. Often, the first step is simply asking for credit. Yes, it is that easy to build credit from scratch.
But, who do you ask? And what do you ask for? If you have no experience with credit cards, loans, or other credit accounts, learn how to build credit from scratch in the following ways.
Even if you are looking for a first time credit card no credit history can prevent you from getting one. Credit card companies want reliable account holders, and they may be hesitant to give you a revolving line of credit.
When you think of a credit card, you typically think of an unsecured account. This is when the lender, the credit card company, pays for your purchases on your behalf with the agreement that you will pay them back. It is a revolving credit line, meaning:
· You can borrow up to the limit.
· Then, repay what you borrowed.
· You can re-borrow up to the limit over and over.
Most unsecured cards have interest charges. These are fees that accumulate when you do not pay your entire balance each month. Credit card interest rates are typically between 10 and 25 percent.
Secured credit cards, however, work in the opposite way. As the secured credit card user, you give the company a deposit in advance of your purchase. You prepay for your purchases, such as buying a gift card to use later or using your debit card.
Prepaid cards will not directly affect your credit score. You can only use credit cards to build credit, as they show lenders that you pay back borrowed funds.
However, prepaid credit cards to build credit help by showing lenders that you can stay within your limit. They can also help you manage your money without interest charges or bank fees with debit cards.
Since you can only use a secured credit card to build credit, you may consider applying for a store credit card. They usually have low limits and only let you make purchases for that specific store. However, they are easier to obtain because of their limitations.
One of the best secured credit card to build credit may be one that belongs to a family member. You can build your credit off someone else’s.