Your credit score is a three-digit number that represents your financial trustworthiness. Scores range from 300 to 850, and higher is better. According to FICO, the most widely-used credit score model, the average American has a credit score of 723. While it’s possible to get loans and credit cards with a low credit score, it’s becoming increasingly difficult to do so. Even if you do manage to secure a loan, you won’t get very good terms if your credit score is below average.
There is plenty of advice for people who wish to repair their credit score, but what do you do if you have no credit at all? Fortunately, with a little work, you can build a good credit score from scratch. Here are a few pointers to get you started.
Get a secured credit card. Secured credit cards are available to virtually anyone, regardless of their credit score. That’s because these cards don’t post much of a financial risk to the card issuer. When you get one, you’re required to pay money into a savings account. That money will be used to cover any missed payments, and your credit line is frequently the same as your account balance. Over time, some secured credit cards will increase your limit as you prove that you’re a trustworthy cardholder.
Repay your student loan on time. Your credit score depends on how you handle revolving credit, such as credit cards, and installment credit, like student loans. Student loans are frequently the first loans people take out. If you repay yours in a timely manner, it will establish a good payment history and increase your credit score.
Get some help from a friend or parent. A joint credit card account can give you an instant credit history. When you’re added to someone’s credit card account, all the good credit that comes with that account will be reflected on your credit report. But that goes for any late or missed payments as well, so be sure that both you and your co-account holder are committed to keeping a good credit score.
Establish a relationship with a bank. Banks provide many helpful financial services. Among them, credit cards and personal loans. If you have had a checking account with a bank for at least a year, and have kept a positive balance, you might be able to take out a small personal loan. If you have funds in a savings account, they could be used as collateral. The point is to take out the loan and make monthly payments until it’s paid off. Be sure that your bank will report the timely repayment to the major credit bureaus. This will improve your credit score and your borrowing power at that particular bank.
Credit can seem like a Catch-22 to people who are just starting out. You need credit to finance major purchases, but it takes good credit to get credit. That can certainly be frustrating. Follow these tips for building your credit score from scratch, and you’ll soon be able to get any credit card you want.
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