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No Credit History?

Some people do not have a credit history. If you are just out of high school or college, if you are a new immigrant to the US, or if you prefer to pay for things in cash, you may not have had the opportunity to borrow before. If you’ve never borrowed money or used credit cards, you have not established a record that shows that you can manage credit responsibly. However, you can take steps to build your credit history.

If you do not have a credit history, here are some things you can do to build credit:

  • Apply for a secured loan or secured credit card. These give you a credit line that’s equal to an amount you deposit with a bank, usually $200 to $1,000. Look for a card with reasonable fees that reports to all three major credit bureaus and that converts to an unsecured card with 12 to 18 months of on-time payments.
  • Apply for department-label store and gas cards rather than a VISA or Mastercard. Department store credit cards are typically easier to get a general bank credit card with a higher credit limit.

  • Getting an installment loan. A personal or car loan can help jump-start your credit history.
  • Get a co-signer. Ask a friend or relative who has good credit to co-sign a loan, which means that he or she shares responsibility for the loan with you.
  • Practice good credit habits.These include paying your bills on time, all the time; never using more than about 30% of your available credit; and not applying for a lot of credit at once.
  • Establish a checking and savings account. These aren’t reported to credit bureaus, but lenders see them as a sign of financial stability.

You may also be able to build a credit history with copies of canceled checks, bills, receipts, rent statements, and phone and utility bills. Many lenders accept this kind of nontraditional credit history as proof of your creditworthiness. You will have to show that your payments have been timely.

New Developments: FICO Expansion Scores

There have been recent efforts to create credit scores for people who have not used traditional forms of credit. Fair Isaac, the company that developed the classic FICO score used by most lenders, has launched a new scoring system called the FICO Expansion score. This system helps lenders gauge applicants who don’t have traditional credit history. Instead of using credit bureau information to calculate the score, the score is compiled by nontraditional sources, such as payday lenders, rent-to-own stores, and companies that monitor people who bounce checks.


New Developments: Vantage Score

The three main credit bureaus, Equifax, Experian and TransUnion have come together to standardize their credit scores. In the past your score from each of the three different bureaus may have varied because not all creditors report to all three credit bureaus. In addition, the different bureaus used different ranges for scores. The new VantageScore will range from 501 to 990 and will be graded on a simple A to F system. The bureaus say this system will be easier for consumers and lenders to use. Because this score is new, it may be a while before lenders use this system consistently.