Building credit is a bit of a catch-22 – you need established credit in order to get approved for loans and other means of financing. However, establishing credit can be difficult without a history of paying off loans and credit cards. Thankfully, simple steps such as opening secured credit cards, paying bills on time, and having your timely rent payments reported to the credit bureau can help you establish a credit history. Here is how to establish credit when you have none:

Open a Secured Credit Card

Getting approved for a traditional credit card with no credit history can be difficult, but you always have the option of applying for a secured credit card. With a secure card, you make an up-front cash deposit, and you are then issued a credit card with a spending limit that is usually equivalent to your deposit.

You can use a secured credit card just like you would a traditional, non-secured card. As you make payments on your card, you’ll gradually build your credit. To optimize the impact on your credit score, try to pay your card off in full by the due date each month, and keep your credit utilization under 30%. This means if you have a credit limit of $1,000, you should never owe more than $300 on your card at a time.

Pay Your Bills on Time

In addition to making your secured credit card payments on time, you’ll also want to make sure that you pay all of your other bills on time. This includes any utility bills that may be in your name, as well as other bills such as cable and Internet bills. Believe it or not, these are all tied to your credit, so making timely payments will help you to build your score.

If you’re ever unable to make a payment on time, contact your lender/service provider as soon as possible. Oftentimes, they will be willing to work out a payment plan with you instead of reporting a missed or late payment to the credit bureaus right away. This can save your credit from being negatively impacted.

Get Authorized on Another Person’s Card

If you have a parent or spouse who is willing to give you access to their credit card, you might consider being added as an authorized user. This will help you gain the benefits of timely credit payments without having to have established credit before using a credit card. If you go this route, make sure you establish ground rules for how much you’ll be permitted to spend and pay back each month. Furthermore, make sure the credit card company reports all authorized users to the credit bureaus.

Enroll in a Rent-Reporting Service

If you have an apartment or other property which requires monthly lease payments, check with your landlord or property management company to see if they enroll in a rent-reporting service. These services report tenants’ monthly rental payments to the major credit bureaus. As a result, you can get credit for making your timely rent payments.

Keep in mind that even if your landlord or property manager is enrolled in a rent-reporting service, you may still need to fill out paperwork to opt in. Also remember that if you miss any payments, this will be reported to the credit bureaus and have a negative impact on your score.

Keep an Eye on Your Credit Report

As soon as you begin establishing credit, it’s important to carefully monitor your credit report for changes. This is a great way to keep an eye on how your efforts are paying off in terms of building your credit. However, it can also help you spot any errors or fraudulent activity on your credit report that need to be addressed.

You’re legally entitled to one free copy of your credit report each year from the three major reporting bureaus (TransUnion, Experian, and Equifax). Be sure to carefully check your report and be on the lookout for any charges or accounts that you don’t recognize. If you spot any problems, you may need to file a dispute with the reporting bureau.

There are also plenty of online services that make it easy to monitor your credit more frequently than once a year. These services allow you to log in and check your credit at any time, and changes are usually posted at least once a month. You can also use these services to sign up for alerts so you can be made aware when there have been significant changes to your credit score or payment history.

Establishing credit when you don’t have any will take some time, but by following the right steps and being responsible with your payments, you’ll be well on your way to a great credit score in no time. Looking for more help with building your credit? Contact our team at Build My Scores today!