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Money Minute
Quick Tips
How to Build Credit When You Don’t Have Any
Money Minute
Start to build good credit by adopting good habits.
 

According to a recent article in USA Today, some 26 million Americans don’t have any established credit and are considered “credit invisible”. Unfortunately, when you don’t have credit, things can get expensive — as a result, many who are already struggling face even harder financial challenges.

For instance, if you’re looking for an apartment, those with credit are typically asked to pay a one month deposit; however, those without credit may have to pay 2 or more months’ worth of rent upfront. The same can go for setting up utilities. If you have no credit history, utility companies may ask for extra deposits.

There are a few things you can do:

  • Get a secured credit card. With secured credit cards, you put down a cash deposit and the amount you put down is typically your credit limit. You then use the card like any other credit card. Just be sure to stay within your credit limit and make all of your payments on time. Also, make sure the secured card reports to each of the three credit bureaus — Equifax, Experian and TransUnion — so they can record your growing credit history. Once you have some credit history, you can apply for more traditional credit cards. When you close the secured credit card, you typically get your original deposit back.

  • Open a joint credit card account or become an authorized user on someone else’s account. The idea is you have someone else equally responsible for the credit card with you, but they should know that if you fail to make a payment on time, you both will feel the consequences.

  • Use credit responsibly. Try not to use more than 30% of your credit limit and pay off your balance if you can. And most importantly, always be on time with your minimum payments.

It takes time to build your credit score. Once you’ve developed a good history, be sure you monitor your credit and use it responsibly.





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