No Credit History? 7 Smart Tips to Build Credit History from Scratch!
Users with no credit history need not worry as they can build one by using some smart credit tips including the usage of secured credit cards.
In today’s fast-paced world, credit is a necessity for most and the saying ‘to get credit, you must have credit’ is apt but often frustrating for new borrowers. Building credit from the start can be challenging since credit history is a prerequisite for building a credit score. The irony faced by new borrowers is that no bank or financial institution would easily approve a loan or credit card without seeing the applicant’s credit score.
It’s a catch-22 situation. To build a good credit score, you need to take on credit. But, to get credit, you need to have a good credit history!
Worry not, here we share seven smart tips on how you can build your credit score from scratch.
Apply for a Credit Card
Most banks and credit card issuers avoid lending finances to applicants who do not have a credit history. They rely on an applicant’s credit history to assess his/her repayment capability. Therefore, for borrowing fresh credit, one must have credit or should have used credit in the past.
Therefore, the question that arises is, if lenders cannot give credit to new borrowers, how can one build credit? Borrowers can heave a sigh of relief as there are a few ways to do so.
One of the commonly used financial products for starting a credit journey is a credit card. Applying for a credit card is easy and can help in easily building a credit score without relying on banks or lenders. One can apply for either a secured or an unsecured credit card.
Avoid Applying for Multiple Credit Cards at Once
Every credit card application impacts one’s credit score. Hence, a borrower must try to avoid numerous credit card applications within a short duration. Lenders often consider multiple applications as credit-hungriness of a borrower. While building a credit history, one must be careful not to hamper the credit score by multiple credit card applications. Instead of applying for multiple credit cards, it makes sense to use one that can help in showcasing one’s credit handling capability. While using a credit card, one must try to keep the credit utilization low and make the bill payments in full and on time.
Use Credit Cards Often But Cautiously
One may not have a credit score either because they have never used credit or their credit history is not considered by bureaus as sufficient. Those who want to build a good credit score must ensure that they use a credit card regularly.
A good credit score can be built in the long run, but it requires regular use of credit cards along with timely repayments. It makes sense to use a credit card at least once a month to keep the credit card active. This can help those who have a good credit history and also those who want to build one from scratch.
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