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MStudioImages/Getty Images June 24, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Dana Dratch is a personal finance and lifestyle writer who enjoys talking all things money and credit. With a degree in English and writing, she likes asking the questions everyone would ask if they could and sharing the answers — along with smart money management tips from the experts. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Bankrate logo The Bankrate promise
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Limited or no credit? You’re in good company. Many times, consumers with no credit history are new to the world of credit. They can find themselves in a Catch-22 scenario, says Jennifer Tescher, president and CEO of the Center for Financial Services Innovation in Chicago. “You need to have a credit history to get credit,” Tescher says. “And you need to have credit to build [a] credit history.” If you primarily use cash and aren’t looking to borrow money right now, you may think this doesn’t apply to you. But what happens when the time comes to finance a car, take out a mortgage or rent an apartment? You need to have a credit score to back you up. Building credit from scratch may feel like an impossible task, but the good news is that it’s possible to do. If you have limited or no credit, here are five strategies you can follow to beef up your credit file. Become an authorized user
If you don’t have credit history, getting approved for a credit card can be tricky. One way to reap the benefits of a credit card without actually applying for one on your own is by becoming an authorized user. An is someone authorized to use another person’s credit account. As an authorized user, any purchases made on the account by you becomes part of the primary cardholder’s account balance. This strategy can be chancy for the authorized user because the liability falls entirely on the primary cardholder. The gamble if you’re the authorized user: If the account holder misses payments, goes into collections or declares bankruptcy, that bad behavior can land on your credit report. The gamble if you’re the primary account holder: The authorized user could max out the card and leave you with the bill. In the perfect scenario, the authorized user gets charging privileges on another person’s credit card, stays within whatever limits the cardholder sets and establishes a history of and responsible card usage. Becoming an authorized user and developing strong financial habits can help because as long as the card remains in good standing, that will be reflected in your own credit history. Before you attempt this arrangement, find out from the issuer if you have the power to. Also, ask the issuer what would happen to account information — good or bad — that’s already on your report if you’re no longer an authorized user. If you become an authorized user, monitor your credit report regularly to ensure the account is being reported to one of the — Equifax, Experian and TransUnion. Apply for a secured credit card
Your thin credit history may not be robust enough for you to qualify for an unsecured credit card. But one possible solution to this is by applying for a . Secured credit cards are types of credit cards that require a cash deposit as collateral. The cash deposit required typically determines your credit limit. It is often equal to 50 percent to 100 percent of the initial deposit. While this limits the amount you can spend, it provides individuals with damaged or limited credit histories an opportunity to qualify for a line of credit. Applying for a secured card and making your monthly payments on time is an excellent way to . Some secured credit cards to traditional credit cards when cardholders have a history of making on-time payments. Beware of cards that come with a bunch of charges, like application fees, annual fees and maintenance fees. exist — even ones that pay rewards. Make a small purchase
While most comes off your credit report after seven years, even the good accounts can disappear after 10 years if they’ve been closed or . In addition, some scoring formulas can’t generate a credit score if it’s been awhile since any of your creditors reported to the bureaus. That means some people who had robust credit files at one time could potentially find themselves with a thin file or no credit score if they close accounts (or stop using credit). If you have a history of credit but no longer have a score, make a small purchase on one of your existing accounts and pay it off right away. That will give you the recent activity the scoring formula needs to assign you a score. If you’re new to the credit game, it , depending on the scoring model used to compute it. For a , your oldest account needs to be at least six months old. Using the , a consumer’s credit report could be scored after the first month of paying on a credit account. Report your monthly rent payments
If you don’t want to use a credit card to build credit, there are a few other options to consider. When you pay your rent each month, it typically isn’t reported, however, . A service offered by Experian allows individuals who rent from a landlord or property management company (that does not already report data) to sign up through a rent payment service working with . This service allows rent payments to be collected electronically while having the ability to report your rental payment history to Experian RentBureau. If this is not an option, there are other rent-reporting services that can help boost your credit, but it comes at a cost. Using a third-party rent payment service may not be the most cost effective method to build your credit, but it is an option worth considering. Apply for a store card
Tread carefully with this one because you don’t want to get yourself in financial trouble with a . However, credit cards offered by stores are usually easier to qualify for than standard credit cards. If you frequent a certain grocery store, for example, consider signing up for the store credit card to build credit while you are shopping for your groceries every month. Trips to the grocery store are expenses you are going to have no matter what, so it could benefit you in the long run to exchange your debit card for the store credit card. Keep in mind that store cards tend to have higher interest rates and lower credit limits than traditional credit cards. If you do decide to go this route to begin your credit journey, establish a strategy to pay off your entire balance each month. If you don’t, you may be hit with high interest charges, and that will hurt your credit score, not help it. The bottom line
After opening your first line of credit — in whatever form that may be — it is important to adopt smart financial habits in order to . You can do this by keeping your balance low and making on-time payments each month. It may take a few months before your payment history can generate a credit score, but it is always better to start working on building your credit before you actually need it. SHARE: Dana Dratch is a personal finance and lifestyle writer who enjoys talking all things money and credit. With a degree in English and writing, she likes asking the questions everyone would ask if they could and sharing the answers — along with smart money management tips from the experts. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer.