Ways People Can Establish Credit

If you have no credit history at all, it can be difficult to find a lender willing to extend an offer of credit. This is because the lender has no idea whether you manage money responsibly and will pay back the debt. You will need to rely on a few unconventional methods to establish your first credit accounts.

Alternative Credit Bureaus

If you do not have any credit accounts that report to Experian, Equifax or TransUnion, you can rely on your payments reported to alternative credit bureaus instead. For example, you might be able to find a lender that will consider your FICO Expansion score, which is based off your rent, utility payments and checking account history. Another option is to fill in your payment history at Payment Reporting Builds Credit, which will then charge you a fee to confirm the accuracy of the history. If a lender will consider your PRBC information, this could help you get your first credit account that will report to the major credit bureaus.

Secured Credit Card

Some lenders offer secured credit cards, which require that you make a deposit in an account with the lender to get a credit line equal to that amount. Because the lender holds onto your money, there is very little risk involved for the lender. After you make on-time payments every month for one year, ask your lender to convert your account to an unsecured credit card and refund the deposit.

Secured Personal Loan

If you have a savings account or certificate of deposit at a particular bank or credit union, inquire whether you could get a personal loan secured by that account. Because you are already a customer, the bank can also consider your account history with your checking account when making the lending decision. If you get a secured loan, you will not be able to access the money held as collateral until you are done paying back the loan.

Piggybacking

If someone you know well, such as a parent or spouse, has good credit, you can use that person's credit history to establish your own. One method is through being added as an authorized user on one of that person's credit cards that has a consistently positive account history. All of the history will appear on your credit report as well and help you obtain credit on your own. Another method is to have the person co-sign on a loan or credit card with you. Because the person agrees to be held responsible for paying the loan, the lender considers his credit score in addition to yours.