Optimism is the faith that leads to achievement. Helen Keller

This section is a must-read if you have no credit score to speak of. Not a score of zero (there’s no such thing), but just a big fat blank where your credit score is supposed to be. A mortgage broker once told me that having no credit score is WORSE than having a bad credit score. Can you imagine? She said it’s because at least with a bad score, lenders can make an educated guess on what to expect if they lend you money or offer you credit. But with no score at all? For all they know, you could be worse than the worst. So if this is the pickle you find yourself in, don’t worry ? with a little bit of patience, it’s easy to fix and usually takes only six months.

The Minimum Requirements for a Credit Score

Let’s start with FICO and what they require in order to build a credit report on you. To get a FICO score, you need a credit report with the following:

• Minimum of one account open for six months or longer
• Minimum of one account without disputes that has been reported to this credit bureau within the past six months
• No indication that you are deceased

First, assuming you aren’t dead, the odds are extremely high that you can safely ignore the requirement that there be “no indication that you are deceased.” As you know, I’m a big fan of the 80/20 principle. Because let’s face it, if you’re alive and kicking, the credit bureaus will probably know it. So why waste time checking up on this now, right? And if by some chance you’re unlucky enough to find that they do think you’re dead, you can cross that bridge when you come to it. So onwards.
Now you’ve got to get that “minimum of one account” requirement locked down ? so without further ado, let’s get to it!

8 Easy Ways to Build a Credit Score When Yours Is Nonexistent

Alright, so you have no credit score and need a credit score to get a credit account, but no one wants to give you credit because you have no credit score.
What’s a guy or gal to do? First, stop worrying. This is easier to do than you might think. Whether your score disappeared due to lack of credit use, or you’re new to the country and that’s why you don’t have one, it’s all good. People like you are successful in getting a credit score all the time, and there’s no reason why you can’t join them!
Here are some of the best ways to get a credit account that will meet FICO’s minimum requirement of one account open for six months or longer with no disputes. (And obviously, it must be an account that reports to one or more of the major credit bureaus.)

1. If They Offer You a Credit Card, Take It!

Do you ever get those annoying credit card applications in the mail? You know, the ones where they say you are pre-approved and all you need to do is fill out the application?
Well, consider them your best friend right now. Verify that the credit card company is legit, make sure they report to one or more of the major credit bureaus, check to make sure you meet the minimum cardholder requirements, make sure there isn’t an outrageous annual fee, and if everything checks out, apply for the card! Once you have it, charge a small amount to the card every month, and pay it off in full when you receive your statements.

Tip: Most of the big banks’ credit cards will report to the major credit bureaus, but call their customer service line to make sure!

2. Get a Department Store Credit Card

Often, department store credit cards are easier to get than traditional cards. So if you have no luck with VISA, MasterCard, American Express, and the like, try a department store card instead. Prior to finalizing your application, remember to call their customer service line to confirm that they report to at least one of the major credit bureaus.
If you can, choose a store that is conveniently located and sells things you need to buy on a regular basis. Remember, you’re going to be going there each month so you can use your card and start building a credit history. So you might as well try to make this as easy as possible by choosing a place nearby, rather than something located far away.

3. Get a Secured Credit Card

If options one and two don’t work, then try this one. But first, here is how a secured credit card works.
Whatever your credit limit is on the card is the amount of cash you’ll need to deposit as collateral in a secured account at the bank. So if the bank offers you a credit limit of $1000 on your new secured credit card, you’ll probably have to deposit $1000 cash into their secure account as collateral. When you cancel the card, or become eligible for a regular, non-secured credit card, you get your deposit back (as long as you’ve paid off the balance on the secured card.)
Other than the need for a deposit from you as collateral, a secured credit card works exactly the same way that a regular credit card does, monthly statements and all! Start by contacting the bank or credit union where you keep your local checking or savings account, and ask if they offer a secured credit card. Find out all the details including the answers to these questions:

• What is the minimum and maximum credit limit?
• What is the amount of the deposit that is required?
• Is there an annual fee for the card?
• Do they automatically approve all who apply, provided they have the required deposit, or is approval subject to a credit check? (Many of these kinds of cards do not require a credit check ? those will be the easiest ones for you to get since you have no credit score.)

Remember, the interest rate on the card is irrelevant since you won’t be paying it anyhow ? you are merely going to be charging a small amount to this card every month, then paying it off in full when you receive your monthly statement. You can also do a quick Google search for something like “secured credit card bank” or “credit union secured card.” But it’s not just banks or credit unions that offer secured credit cards. Even the traditional credit companies offer these products.

For example, Capital One was offering a secured MasterCard with a minimum deposit of $200 to secure the $200 credit limit. They report to all three major credit bureaus and there is no annual fee either. Granted, the interest rate on this card is high, but since you are only using the card to charge small amounts each month that will be paid off in full with each statement, the interest rate is irrelevant.

Do another google search, this time just for things like “secured credit card VISA,” “secured credit card MasterCard,” et cetera. You may be surprised by the options that turn up. Another great way to find credit cards that suit your needs is www.CreditCards.com. This website is jam-packed with information on the credit cards available within the United States, and makes it easy to compare your options.
After using a secured credit card responsibly for a year, you should qualify for a regular, unsecured credit card.

4. Become An Authorized User on Someone Else’s Credit Card Account (Plus, a Pitfall That You Need to Be Aware Of With This Method!)

Married? Ask your spouse to add you as an authorized user on their credit card ? now this credit card account will show up on your credit report too! (Note to non-US readers: While this works in the US, it does not work in all countries. For example, this strategy does not work in Canada.)
Have someone else in your life who trusts you 100% and would agree to add you? Then go ahead and ask them! You won’t have to be on their account forever, just long enough to build up a credit score of your own so you can get credit on your own. But, you’ve got to be careful with this one. If the person who kindly adds you to their credit account has had trouble making payments on it in the past, this will reflect badly on YOUR developing credit score. So choose your partner for this project wisely ? only choose someone who you know has a long-standing habit of paying down their credit card account on time, every time. Also important is to choose someone who only uses a small percentage of the maximum credit limit, since this is looked upon favorably by the major credit reporting agencies 먹튀검증커뮤니티.

Last but not least, as soon as you are able to successfully get an account in your own name, I’d strongly consider getting your name removed from this joint account. You don’t have full control over it, and depending on who you are sharing it with, it could be risky to your long-term credit score if they mess up and do something that could harm your score, such as missing payments.

5. Use a Credit Builder Loan

Credit builder loans are offered by several banks and credit unions, as an alternative to using credit cards to build a credit history. Before signing up for one, make sure they report to at least one of the major credit reporting agencies, since that’s the only way your loan will result in you getting the credit score you want! The way these work is the bank or credit union agrees to lend you money (typically around $500-1000) that you must pay back via regular monthly payments, usually over a period of one to two years.

Now remember, it doesn’t take long to get a credit score. You only need an account for a minimum of six months ? so in the case of credit builder loans, you might as well choose a shorter loan repayment period to save money on the interest they’re going to charge you. Because once you have that credit score from the credit builder loan, you’ll see that it’s much easier to qualify for credit cards, and you can use a zero-annual-fee credit card to continue building your credit history.

How To Avoid Credit Builder Loan Rip-Offs

Sadly, the credit builder loan industry has a few sharks in it that are always out there looking to take advantage of easy prey. Don’t be the easy prey. I recently saw an offer from a shark, err, bank… for a credit builder loan that not only required you to put down collateral for the entire loan balance, but charged 240% more in interest compared to a local credit union. Talk about a colossal rip-off! (And, the local credit union required you to provide ZERO collateral, thus making their deal even sweeter!)

Luckily, the sharks are easy to avoid. Remember, knowledge is power ? take 15 minutes and do a quick search on Google to see what kinds of credit builder loans are out there. Get an idea of the rates being charged. Rate not posted? Use their contact form to get in touch and find out! Do this even if you plan on using your local bank or credit union ? the only way you’ll know if you’re being treated fairly is by taking the time to see what else is on offer from their competitors.
The main thing I want you to take away from this is that you ought to be looking for a credit builder loan that ideally does not require you to put down collateral and that charges you a fair interest rate. Oh, one more thing. Did you know that you can get a credit builder loan that will pay YOU interest?

This is because the money you borrow is often deposited into an interest-bearing account by the bank or credit union. Sure, the interest they pay you isn’t going to completely make up for the interest you pay to them for the loan, but still, it will help to offset some of the interest you’re paying, so why not?! Choose carefully and don’t let anyone take advantage of you ? the last thing you want is to get ripped off.

Is a Credit Builder Loan the Right Choice for You?

The thing I don’t like about credit builder loans is that they cost you interest. For this reason, using a zero-annual-fee credit card to build up a credit history and score would be my first choice. But if you have no luck getting one of those, or you can’t come up with the required cash to use as collateral, then consider more costly options, such as the credit builder loan.

6. Use a Passbook Loan

These are similar to a credit builder loan. In this case, you take out a loan from the bank, using money in your savings account or money invested in a CD as collateral. However, many, if not most, passbook loans are not reported to the credit bureaus. So before signing up, check if your financial institution will report this to the major credit bureaus.

8. Get a Co-Signer on a Loan

This option could be useful if you actually need the money you’ll be borrowing right now. (Because with a credit builder loan, for example, you don’t actually get the money that the bank is “lending” to you; instead, they just deposit it in a secure account that you can’t touch until the loan is paid off.)

So say you need to buy a car now, and cannot wait to save up the cash for it ? getting a co-signer on that loan could be the perfect solution. You’ll get the money you need for that car, and you’ll get a credit score at the same time.
However, keep in mind that getting a co-signed loan can impact more than just your credit score and should be used with extreme caution. For some people, getting a co-signer is a great idea; for others, it’s not.

Sam had his loan denied because he’s a new college grad with a thin credit file, but otherwise great credit. He has a steady job that pays great, the job market is booming in his industry, and he’s 100% certain that he can afford to make the payments over the long term. For Sam, getting a co-signer on his loan is likely to work out just great.
Kayla had her loan application denied because the lender didn’t think her income could support the payments. Kayla would be wise to forego the loan altogether, even if someone is kind enough to co-sign for her. If she defaults on the payments and her co-signer is forced to take over, it could destroy her relationship with that person, not to mention the credit of her cosigner if payments end up being late or missed.

If your situation mirrors Sam’s, getting a co-signer on a loan could be a perfect solution to building up your credit file. But if money is tight, like with Kayla’s situation, consider skipping a loan that will only make things harder for you, and instead, look for a solution that better fits your budget.

The Final Requirement: No Disputes

Last, but not least, no matter which of the above eight options you use to build your credit score from scratch, be sure to always make your payments on time. Remember, FICO also requires that your account have no disputes. If you’re always making your payments on time, there won’t be anything for anyone to dispute and you’ll be all set!

Summing Up

Don’t stress too much over which one of the above options you ought to use first. My advice is to start with trying to get your hands on a credit card, and if you are not successful, then work your way through the remaining options. You only need to successfully obtain one of the above options in order to get a credit score, and pretty much anyone can pull that off.

Also, remember to open any new accounts gradually since if you open a whole bunch of new credit accounts at once, it can have a negative affect on your credit score. Better to go slow. Unless you have a compelling reason not to, I recommend that you start with opening one of the account types discussed in this chapter, see how your credit score turns out, then move on from there.

The good news is, if you play your cards right (and you will, after reading this chapter!), you can look forward to having your very own shiny new credit score in as little as six months!

Action Steps

Go through the options for obtaining credit and decide which one you want to try first, second, third, et cetera.
Research the options available to you for your choice. In the case of credit cards, be sure to find out if they will charge you an annual fee or not, and remember that the amount of interest they charge doesn’t matter since you’ll be paying off your account in full each month anyhow. For the various loans options, follow the steps in each section to figure out which loan product, if any, is suitable for your situation.