How to Establish Credit with No Credit History: 8 Tips From Experts

Secured credit cards let people with limited credit or even no credit get approved, but they require a cash deposit of at least $49 to $200 to get started. This security deposit is used as collateral for the line of credit on the card, which the user can utilize to make purchases. 

The benefit of secured credit cards is that they report monthly payments and balances to the three credit bureaus — Experian, Equifax, and TransUnion. Many of the best secured credit cards are also available with no annual fee, and some of them offer rewards for spending and perks like free credit scores.

Just remember that secured credit cards have the potential to help or hurt your credit. You'll get high marks for your payment history if you pay your credit card bill on time, but you can hurt your credit if you max out your credit limits or pay past your due date.

2. Take Out a Credit-Builder Loan

Credit-builder loans are financial products that don't actually lend the borrower money. Instead, the applicant agrees to make monthly payments to a savings account or certificate of deposit (CD) in their name, and those payments are reported to the credit bureaus as if they were regular loan payments.

At the end of the loan term, the "borrower" gets the money they paid in back, minus interest charges and fees. In that sense, credit-builder loans are similar to forced savings accounts that also build credit along the way.

While credit-builder loans do charge interest and fees, the amount you're charged tends to be nominal. For example, a credit-builder loan from a company called Self with a $48 monthly payment for 24 months would have you pay in a total of $1,152 over that timeline. At the end of 24 months, however, you would get $992 back. This means the total cost of this two-year credit-builder loan is $160.

3. Finance a Purchase with an Interest-Free Offer

Some retail stores may let you make a purchase with “90 days same as cash" or a similar offer, meaning you won't pay interest if you pay off the purchase over that timeline. It may also be possible to buy new home furniture or appliances with this type of offer, although qualification requirements can vary widely depending on the store and the company they use for this financing.

Just keep in mind that these offers may not be available if you're building credit from no credit, and they are more likely to work if you have at least some history on your credit reports. Also note that temporary "interest-free" offers for retail purchases may charge deferred interest if you don't pay off the balance before the introductory period ends. This means you'll begin paying interest on remaining balances, but you'll also pay back interest from the first few months (or years) since the purchase was made.

4. Obtain a Credit Card at a National Retail Chain

Store credit cards are unsecured, meaning you don't have to put down a deposit as collateral. These cards are also much easier to qualify for than regular unsecured credit cards since you can only use them in one store (or a family of stores) and they tend to come with low credit limits. 

“If you apply for a store credit card from Kohl's, you can only use it within Kohl's stores and the starting credit limit can be as low as $300.”

That said, store credit cards can help you build credit like any other credit card through responsible use. This means not maxing out your credit limits and paying your credit card bill early or on-time each month. Many store cards also give you an upfront discount on merchandise for signing up, as well as ongoing promotions that can help you save at your favorite retailers.

5. Be Added as an Authorized Credit Card User

Being added as an authorized user can help you build credit when you have none, but only if you find a willing person to help you. The fact is, you need to find a trusted family member or friend with good credit who wants to add you as an authorized user. If you do have someone you can count on, this move will get you your own credit card with your name on it that you can use for purchases.

Being an authorized user can help build credit if the card issuer reports authorized user activity to the credit bureaus. However, you should know that there are risks involved. For example, charging purchases and not paying back the primary cardholder can cause trouble in your relationship. This is especially important to note since only the primary cardholder is responsible for repayment, so they're stuck paying off your charges if you don't meet your obligations.

Also, you can see damage to your credit score if the primary cardholder maxes out credit limits or pays the bill late.

6. Have Rent and Utility Payments Reported to Credit Bureaus

There are several ways to have your rent payments, utility payments, and other types of bills reported to the credit bureaus to help you build credit. Some of the services that do this are free to use, whereas others charge a fee.

For example, the Experian Boost app will report your subscription services, utility bills, and even rent to your Experian credit report for free. From there, companies like RentReporters and Rental Kharma will report your rent payments to the credit bureaus in exchange for a fee.

Just keep in mind that all these services are somewhat limited. For example, Experian Boost won't help your credit reports with Equifax or TransUnion, and Rental Kharma only reports to Equifax and TransUnion (but not Experian).

7. Set Up a Joint Account or Get a Loan with a Co-Signer

If you have a partner or spouse with good credit or someone else you trust, applying for a joint loan or having them be a co-signer can be an alternative to options like getting a loan for bad credit. Of course, this move really only makes sense if you need to take out a loan, and if the other person on the account has good credit you can use to your advantage.

Just remember that plenty can go wrong when you take out a loan with another person, including the other person not paying back their part of the bill. Like with other types of loans, you have the potential to hurt your credit if you pay your bill late. Finally, the Federal Trade Commission (FTC) notes that both account holders on this type of loan are legally required to repay the debt.

8. Use a Program Like Experian Go

Experian Go is a free service and app that helps you begin building credit so you can establish a credit score. The app does this by assessing your personal situation with credit then suggesting moves you can make to get on the right path.

The Experian Go app is free to use, and it makes it easy to monitor your credit and track your progress over time. You can even use this service to build a credit report with payments you're already making that aren't being reported to the credit bureaus on their own. Just remember that Experian credit products only help with your Experian credit report, so they will do nothing to build your credit history with Equifax or TransUnion.

How to Tailor Credit-building Strategies to Fit Different Circumstances

The moves you'll want to make to fix bad credit or no credit really depend on which part of the journey you're on. For example, you'll want to do things differently if you have no credit history at all than if you're trying to rebuild credit after bankruptcy or fix bad credit due to mistakes you made in the past.

If you have no credit history at all, for example, this could be due to a range of circumstances. You could be:

• A young adult first starting out who just needs help getting started
• An immigrant or international student who is new to this country

If you have bad credit, you could be:

• Someone who is rebuilding credit after a financial setback, such as bankruptcy or foreclosure
• Someone who made late payments in the past, or has older accounts in default

In any of these scenarios, you'll want to consider which of the credit-building moves we suggest could actually work for you. If you have bad credit or no credit at all, for example, you may not be quite ready to get approved for a store credit card or an interest-free offer. However, pretty much everyone (regardless of credit history) can use a secured credit card or a credit-builder loan, or start having their rent and utility payments reported to the credit bureaus to help boost their score.

What Does It Mean to Have an Established Credit History? 

Having credit history on your credit reports happens when you have had some type of credit in the past and you have had balances and payments reported to the credit bureaus. If you just turned 18 and you have never had a loan or a credit card in your name, for example, it's possible to have no credit history at all.

• No credit = no credit score. When you have no credit history, you don't have a low credit score. No credit history actually means you have no credit score at all.
• You have to get started somehow. Having no credit is the reason people use apps like Experian Boost or secured credit cards to get started.
• Get help boosting your score. The financial tools and steps on this list can help you get reporting added to your credit reports, which can lead to a starter credit score you can build on over time.

Why Is It Important to Establish Credit? 

Establishing credit history may not be important at this exact moment, but it will be eventually. Consider the reasons you'll eventually want to have good credit:

• You want to own a home or rent an apartment. Having good credit can make it possible to qualify for a mortgage, and maybe even a home loan with the best rates and terms. Good credit also means you can rent a place without a co-signer.
• Buying a car is one of your priorities. You'll want good credit before you apply for an auto loan. Otherwise, you'll pay high interest rates and more fees.
• You want to save money on car insurance. Having good credit means insurance companies see you as a lower risk, and this translates to lower auto insurance rates. 
• You want options. Having good credit makes it easier to live life on your own terms, whether you want to move, go on vacation, or take out a personal loan for excellent credit and spend it how you want.

How Quickly Can I Establish Credit?

Because the credit bureaus update credit scores once per month, your score could appear or improve within 30 days of the date your financial company reported payments to the credit bureaus. However, you may have to wait up to six months to see a credit score appear with some credit scoring models, including certain types of FICO scores.

5 Tips to Build Your Credit Once You’ve Established a Credit History

These tips can help you continue building credit once you have a credit score:

• Keep your credit balances low. Most experts suggest keeping your balances below 30% of your available credit for the best credit score results, which means never owing more than more than $450 for every $1,500 in available credit you have.
• Make on-time payments each month. Never pay your bill late or you'll live to regret it. If you're afraid you'll forget, set up bills for autopay when you can.
• Avoid getting too many cards at once. Having too many cards shows card issuers that you could be a greater risk, so your credit score could suffer.
• Monitor your credit history and score. Watch your credit score and monitor your credit reports for free at AnnualCreditReport.com.
• Keep old accounts open. Having older accounts on your profile can help your credit in the long run, so don't cancel them for no reason.

Understand the Basics of Credit

When you look at the factors that impact credit scores, it's easy to see why you'll need to pay your bills on time, avoid opening a lot of new accounts, and keep your debt levels in check.

Here are the factors that influence FICO credit scores:

• Payment history: 35%
• Amounts owed: 30%
• Length of credit history: 15%
• New Credit: 10%
• Credit Mix: 10%

Here are the factors that influence VantageScore 4.0 credit scores:

• Payment history: 41%
• Depth of credit: 20%
• Credit utilization: 20%
• Recent credit: 11%
• Balances: 6%
• Available credit: 2%

These factors are all considered by the credit bureaus when determining different scores, which means they each play a role in the score you end up with and how it changes over time. 

Final Word

Now that you know how to establish credit with no credit history or limited credit, you have some decisions to make. You can decide to make a few different moves we have outlined in this guide, even all at once. However, you absolutely must decide to use credit responsibly by keeping balances low and making payments on time.

Your future with credit depends on the steps you take right now, so choose wisely and always treat your credit with care.

• Equifax, "What Is a Secured Credit Card and Does It Build Credit?" Accessed March 23, 2023.
• Experian, "Credit Card Authorized User: What You Need to Know." Accessed March 23, 2023.
• Consumer Financial Protection Bureau, "How to understand special promotional financing offers on credit cards." Accessed March 23, 2023.
• Self, "What Is A Credit Builder Loan & How Does It Work?" Accessed March 23, 2023.
• Federal Trade Commission (FTC), "Cosigning a Loan FAQs." Accessed March 23, 2023.
• Capital One, "A Quick Guide to Credit History," Accessed March 23, 2023.
• Equifax, "How Often Does Your Credit Score Update?"  Accessed March 23, 2023.
• Experian, "How Long Does It Take to Get a Credit Score After Opening an Account?" Accessed March 23, 2023.
• Experian, "What Is a Credit Utilization Rate?" Accessed March 23, 2023.
• myFICO.com, "What's In My FICO Scores?" Accessed March 23, 2023.
• VantageScore, "The Complete Guide to VantageScore." Accessed March 24, 2023.