Building Credit Without Credit

Building credit without credit can be a daunting proposition, since credit is traditionally based on one’s credit score and standing.
In this situation, the initial hurdle would be to establish to lenders that you present little or manageable risk and have the means to manage credit. One of the easiest ways of achieving this is to open a savings or checking account. When one doesn’t have a credit record to speak of, owning a bank account is one criterion that lenders value when judging creditworthiness. Having a live account with a bank would give the impression that one is liquid and capable of managing his finances properly. Creditors would also look at one’s employment history to check if he has stable employment. Having a stable job would mean that one has a consistent and steady stream of income, which ranks high among lenders.

Owning a house would also do one good when one is building credit without credit. If you own your home that would mean that you’re earning a decent and steady income, and would reflect financial stability. If one is just renting, one thing that creditors look for is how long one has been staying in his current residence. Lenders look favourably to people who stay put in one place and frown on individuals who make rounds and hop from one place to the other. If you move residences a lot, banks may suspect that you’re having trouble keeping up with house payments.
Another resource that one can consider when building credit without credit is getting a department store card. Store cards are pitched by retail establishments to establish customer loyalty and are relatively easy to procure. To sweeten the pot, they offer substantial discounts or cash-backs for a customer’s initial purchase. On the other hand, store cards are widely known to charge high interest rates.

Normally, credit bureaus recognize department store accounts as good templates for determining credit scores, so these types of cards could be a big help to people building credit without credit. However, one has to exercise discipline and control when using department store cards to make sure that the cards’ credit building capabilities are maximized.
One other option that a person can consider when building credit without credit is acquiring a secured credit card. A secured credit card works around the same principle as secured loans such as mortgages and auto loans. For example with mortgages, a debtor has to put up a valuable asset as collateral, which could then be taken away from him in case he defaults on his payments.

With a secured credit card, an individual deposits an x sum of money with a bank, which can then be confiscated if he doesn’t make good on his payments.
Building credit without credit to gain access to loans and other financial instruments is not that simple and easy. However, with a little persistence and resourcefulness it can be accomplished.


Source: Credit Cards For People With Bad Credit Rating

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