Unless you’re among the elite One Percent of America, you don’t have much in the way of disposal income. Therefore, you will undoubtedly need to build a reasonably good credit score sooner than later. It matters not if you are interested in purchasing an automobile, a condo or home, furniture, jewelry, etc. we all must operate within the confines of commerce at some point in our lifetime. So, if you are without any credit history at all or if you have only a little credit history but not enough to calculate a credit score the below steps will help you. And it’s because, you have no credit history that the banks that offer credit cards will be less than anxious to approve your credit application. So the steps below are just for you!
Current Recurring Payments
The monthly obligations that you currently pay for daily living expenses, things such as (a) Utilities (gas and/or electric), (b) Cable TV, (c) Rent or, (d) Cell Phone, can all be used as a means of building your “invisible credit”. Call each of your creditors listed above and ask if they would be so kind as to report your payment history to all three of the credit bureaus (Equifax, Experian and TransUnion). However, keep in mind that these creditors have no requirement to report to the bureaus but you are only hoping that they will comply with your request to help you build your credit.
It goes without saying that you should only do this if you are and have been paying timely with these creditors. Your credit payment history is extremely and disproportionately important when having no credit at all.
Credit Card Piggybacking
There is another notable way of building credit that may require a favor from someone. It is known as “piggybacking” or becoming an “authorized user” of someone else’s good credit account. You must pick someone that has very good credit and who also has a history of being responsible with respect to paying their bills. When you’ve identified the relative or friend who fits this description, upon approval of your request, they will call their credit card company and ask that you be added to their account as an “authorized user”. Once done, Presto! The entire credit history of the primary account holder will show up onto your credit report and it will effectively boost your credit score. All of that and you didn’t even have to apply for a single credit card.
Peer-to-Peer Lending (aka P2P Lending)
There are two leaders in an industry known as “Peer-to-Peer Lending” they are: Prosper and Lending Club. These lending companies match borrowers with lenders and the outcome is typically better than what conventional banks are able to do. We strongly recommend you look into this way of building your credit without the use of credit cards because these P2P lenders also report your payments to all three major credit bureaus.
Taking out a small loan with a credit union can also prove to be a smart move to make. You may have to apply to become a member first but Credit Unions typically have lower interest rates than most conventional lenders. So applying for a small loan can boost your credit score quickly as most credit unions do report to the credit bureaus.
There is an alternative method of applying for a traditional credit card, it is applying for a secured credit card instead. The banks and/or credit unions that offer traditional credit cards and loans will sometimes offer “secured” ways of obtaining credit which can help to bolster your credit as well. This requires that you deposit a small amount of money into an account which will act as collateral. Since the risk associated with this sort of transaction account is at a minimum, your chances of approval are very high.
Paying off an installment loan over time can improve your credit score because it will prove to those who are watching via your credit report that you are a responsible consumer. There are some retailers, such as furniture stores, who offer promotional introductory loans to consumers to attract them into purchasing their merchandise with little or no interest rate. Be sure to confirm that the retailer reports to the credit bureaus before implementing this method to increase your invisible credit score.