Ways to Build Credit If You Don't Have Credit

Auto lenders, mortgage lenders and some insurance companies will request your credit history before doing business with you. No credit history or score can trigger a rejection or an extremely high interest rate. Fortunately, there are ways to get around no credit history. Building credit is key to proving to lenders and creditors that you're responsible and worthy of good financing deals. Consider a few ways to build credit from scratch.

Quick Credit Report

If you're a young adult looking to quickly build your credit history, ask one of your parents to include your name and Social Security number on one of their credit cards to give you an instant credit history. This method has its risks and benefits. Because your parents are likely long-term credit card users, adding your name to one of their older accounts in good standing can provide a quick high score because of the length of their credit history and their good payment habits. On the other hand, if your parents do not manage credit well, their lateness and high outstanding debts can bring down your score.

Secured Credit Card

Open a new credit account without the help of parents or another adult by applying for a secured credit card with your personal bank. These accounts can help you establish credit and even rebuild credit after a bankruptcy. Simply visit your bank branch and inquire about secured cards. Ask about the security deposit and other requirements to open the account. Deposits between $300 and $500 are typical, and your deposit determines the credit limit on the card. According to MSN Money, 12 to 18 months of a good payment history often results in the conversion to an unsecured credit card, wherein the bank refunds your deposit.

Installment Loans

Installment loans such as a car loan can help you build credit if you don't already have credit. There are ways to get a car loan with no prior credit history. You can ask your parents to co-sign an auto loan agreement. The lender uses their credit history to help determine approval, but you're responsible for the monthly payment. Another approach involves getting a car loan on your own from a privately owned dealer that provides in-house financing to help people with bad credit. The negative side to this method is a higher rate on the car loan, and these dealers may not report to all three credit bureaus. Only buy from a dealer that will report your good payment history to the bureaus on a regular basis.

Building a Good Score

Acquiring financing and credit to help build your personal score is the first step. To keep a good score and easily qualify for the best rates in the long run, practice excellent credit habits. This includes paying all your creditors and bills by the due date each month, and controlling debt by only charging what you can afford to pay off each month. Credit inquiries can hurt your score, so only apply for new credit when necessary.