Seems like you need credit for everything: buying a house, getting a loan, and even renting an apartment. Your credit score is your magic number to unlocking a lot in your financial life. But if you’ve never had a line of credit to your name or you barely have any credit history, you may be struggling to think of where you fit into the credit history equation.
If you don’t have any credit history, you have two options: start building credit history or go off the grid and try to avoid needing credit in the first place. We’ll cover how to accomplish the first point – which is arguably a lot easier than the second choice, though not impossible.
So just how do you go about building your credit history? Here are a few simple steps to building solid credit:
- Double check to make sure that you do or don’t have any credit history. You’d be surprised what may or may not be in your credit history, even if you don’t think you have any credit to your name or you’ve never checked your credit before. Before assuming that you’re starting with a blank slate, you’ll want to check your credit report. That will show you if you have any lines of credit that have been opened under your name. If there are any accounts you don’t recognize, your name might have been used to open up an account without your knowledge (or it could be that one account you opened years ago that you forgot about…).
- Ask your bank about a secured credit card. A secured credit card is an easy way to start building credit through your bank or credit union. They’re kind of like a mix between a debit card and a credit card, since you’ll need to make a security deposit first and then you’ll receive a credit limit that’s usually equal to the deposit you made. But unlike a debit card, activity on your secured credit card will be reported to the credit reporting bureaus, helping you build credit history.
- Once you have momentum, open a second line of credit. Once you’ve got some positive credit history with a secured credit card, you’ll want to open a different line of credit to help build your score and mix things up. Different types of credit besides just a card can help boost your credit score, so consider taking out a smaller loan or opening up another account.
- Use your credit responsibly. Once your start building credit, you’ll want to make sure that you use it responsibly. The worst thing you could do is damage your newly established credit history! Late payments, even on small things like your utility bills, can end screw up your credit history in the long run.
So that’s the basics of credit building. But if that’s not your style, you may choose to…
Go off the grid. If you don’t want to play the credit score game, it can be really difficult but not impossible to live with a super low score or no credit score at all. Instead of using a credit card or taking out traditional loans, you’ll probably have to resort to using debit cards and borrowing from friends, family or other alternative lending sources.
