No credit means that you have no borrowing or payment history on your credit report. People with no credit don’t have a track record of managing credit cards and other accounts. If you’re a student, you may have no credit, unless you’re paying off a credit card or a student loan. Anyone who doesn’t borrow money, or hasn’t borrowed anything in the last seven years, will have no credit.
With no credit, it is difficult, but not impossible, to establish credit. Lenders may be hesitant to extend credit to someone with no record of managing credit. Simply put, it takes credit to get credit.
To start out building credit, take advantage of other forms of credit. If you don’t have a credit card, consider taking out a student loan or personal loan. Make sure you borrow an amount that you can realistically pay back. Making consistent, timely payments, preferably above the minimum amount due, will quickly help build your credit score.
If you’re not getting approved for other forms of credit, a secured credit card may be an option. You put down a security deposit to open the account, and the amount of your deposit determines your credit limit. With responsible use, you may qualify for a refund on your deposit, an increase in your credit limit, or be eligible to transition to an unsecured credit card with no deposit.
Good secured credit cards to consider are the Discover it Secured Card and the Capital One Platinum card.
You can also sign on as an authorized user on someone else’s credit card. When you’re an authorized user, activity on that card typically appears on your report as if it’s your own card. The drawback is, if there’s any negative activity on the card, that will also appear on your credit report.
Having no credit should not be confused with having bad credit. When you have bad credit, you’ve already established a history of mishandling credit accounts. With no credit, you’re starting out with a clean slate. A lender may be more willing to work with you than someone with bad credit. When you have bad credit, you’ll have to convince lenders you won’t the same mistakes that led to your poor credit history in the first place.
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