How To Start Building Your Credit In 2022

 

Obtaining a loan or credit card can be a struggle if you have no borrowing history.  Lacking credit history simply means you don't have enough payment history reported to the credit bureaus to produce a credit score.

Not having a credit history may not seem like an issue at first glance if you use cash and do not need to borrow money. But when it's time to get a mortgage or a car note, not having sufficient credit history could be the difference between you getting a new house or a set of wheels. Having good credit history can also be important when you're looking to rent an apartment, buy insurance and even apply for a job.

The good news is it's possible to build good credit from scratch. Building your credit could put you in a better position to meet your financial dreams. Here are a few ways to start building your credit.

1. Apply for a Secured Card

Applying for a secured credit card can be a fantastic way to build your credit. A secured credit card is much easier to get approved for than an unsecured card because it requires an upfront deposit to obtain the line of credit.

The deposit you'll need to provide varies depending on the credit card. The typical minimum deposit required for secured credit cards is $200.

Credit limits can vary on secured credit cards, but more often than not they are equal to the deposit amount. Once you start providing a positive payment history on your secured card, you may get your deposit back and the opportunity to upgrade to an unsecured card; This is typically done by contacting the credit issuer for that specific card.

2. Become an Authorized User

If you don't have any history of credit accounts, it will be very difficult to get approved for great loans or credit cards. Becoming an authorized user on a family member's credit card is one way to skyrocket your credit that doesn't require you to apply for your own card(s). Basically, you'll be added to the credit account by the primary account holder and get your own card. In return, the credit account, and its history, will appear on your credit report. This helps you drastically improve your credit score.

Before asking a family member or friend to add you as an authorized user, it is paramount to be selective with whose credit history you decide to obtain. You should only become an authorized user on an account that has an excellent payment history. 

3. Apply for a Store Card

Credit cards offered by brick and mortar and online stores are generally easier to qualify for than other traditional cards. If you shop at a store often, you may want to consider signing up for their store card. This could help you build credit while you do the shopping you otherwise were going to do anyway.

Side Note: Store cards charge higher interest rates than other cards. If you decide to open a store card it is best to pay off the entire balance each month. 

4. Primaries and Tradelines

Some amazing sites are offering different and unique ways to build your credit while also saving you money and time. These sites will report primaries and tradelines to your credit report for a monthly fee. Here are a few:

1.) Self Financial Inc. (CD Loan)

2.) SeedFi  (credit building loan)

3.) Kikoff Inc. ($500 revolving credit line)

4.) Credit Strong (personal and business tradelines)

5.) Grow Credit Inc. (build credit W/ subscriptions)

These are just a few of the many sites and apps that can help you build a better credit history. Don't be afraid to do your research and explore new options to build your credit. Remember having a good credit score is very important.

Remember Building Credit Takes Time

Building credit from nothing does not happen overnight. After opening your first account, it could take months before your payment history is reported to generate a credit score. That's why it's great to start working on your credit before you need it.

While working on your credit, remember that if you keep your balances low and pay on time every month, you'll be on your way to obtaining the credit score you need to achieve your financial dreams.