Easiest Ways to Build Your Credit

Consumers need credit to build a credit history. But oftentimes, getting first time credit can prove challenging. And if you have no credit history, lenders may deny your credit application as if you had a low credit rating. Certain tricks can help you establish and build credit. The earlier you begin to establish credit, the quicker you can finance a home or acquire other lines of credit.

Secured Credit Card Options

Getting approved for a major credit card with a financial institution can put you on the path to a good credit history. But getting your first credit card isn't easy, and to acquire credit, you may have to consider secured credit cards. Secured credit cards are cards that require collateral in the form of a security deposit between $300 and $500. The drawback is that you need to pay this deposit before you can qualify for approval. Another disadvantage is that secured credit cards require other fees such as an annual fee and setup fee, and sometimes, credit card issuers will report the credit account as secured to the bureaus, which can impact your ability to acquire other types of financing. This is because a secured credit card often indicates credit problems. On the other hand, secured cards benefit applicants who cannot qualify for an unsecured card due to bad credit or no credit. These cards provide the opportunity to establish credit, wherein you may qualify for an unsecured card in the future. Ask around and look for a credit card company that doesn't report the account as secured.

Piggyback Credit Card

Young adults can establish credit with the help of their parents or older siblings with a method called piggyback. Basically, someone with a credit card agrees to add your name to their account. Credit card companies view you as an "authorized user" and they'll mail a card in your name. The primary accountholder remains responsible for the account. However, the account will appear on your credit report, and if it remains in good standing, you'll start to build a good credit score.

Apply for an Auto Loan

While it's tricky to get a credit card, personal loan and mortgage with no credit history, there are auto dealers who specialize in helping newbies establish or reestablish their credit history. Commonly referred to a "fresh start" or "bad credit dealers," a low credit score or no credit score doesn't impact the approval process. However, these lenders will require steady, verifiable employment and perhaps a down payment. Higher interest rates are typical with bad credit and no credit auto loans.

Payment History

Securing a credit card or auto loan is only one aspect of building credit. The way you manage credit after your approval impacts your credit score and history. Different factors affect the credit scoring process. And maintaining a good, solid score involves adopting good habits such as making timely payments and keeping credit card balances low. According to MyFico, payments account for 35 percent of credit scores, whereas the amount owed accounts for 30 percent of credit scores.