How to Build Credit When You Have None

Building credit scores and cartwheels. What do the two have in common? Surprisingly more than you think. Let’s bring Simone Biles into the conversation. Yes, gymnastics legend and Olympic Gold Medalist Simon Biles (stay with me, I promise there is a method to my madness).

Simone Biles has an insane history of being good at what she does. Thus far in her career, she’s secured 23 gold medals at the World Gymnastics Championships and earned the title of the most decorated gymnast in history. If Simone’s coaches asked her to do a cartwheel, they would have faith that she could perform the request. Why? Because time and time again, Simone has proven that she is fully capable of doing that skill and doing it well. Think of your credit score in the same way as her reputation.

Before I explain, familiarize yourself with the basics of credit scores by reading our in-depth credit score blog. This way, we’ll all be on the same page and ready to focus on boosting that score.

Why Are Good Credit Scores Important?

Let’s flip back (see what I did there). When you have a good credit history, it proves to lenders that you are reliable in repaying borrowed money. They can trust you because you’ve proven yourself financially trustworthy in the past. Like Simon’s coaches trust in her abilities, lenders trust in a person’s financial history.

It is beneficial to have a strong credit history and good credit score because it extends your financial horizons. The better credit scores you have, the easier it is to get loans, credit cards, and lower insurance rates. But how do you build credit in the first place? It’s easier than you think. You just have to lean into the first step of the credit card cartwheel, and eventually, you can reach a score worthy of a gold medal.

How To Build Credit

Become an authorized user

Does a family member or significant other have a credit card? Ask if they can add you as an authorized user. When you’re an authorized user, that card’s payment history is added to your credit files. In other words, when the card owner pays their bill on time, that builds both of your credit histories. You don’t need to use the card yourself, but you can if your authorized user allows you to. However, the payment responsibility always falls on the primary cardholder. But be careful! You don’t want to become an authorized user of someone with bad credit card habits. Their poor financial decisions can hurt your score!

Apply for a secured card

A secured credit card requires a cash deposit when you open the account. This deposit is usually the same amount as your credit limit. If you miss or are late to a payment, this deposit acts as a safeguard for your lender so they can reimburse themselves with the funds. Unlike debit cards, the activity on your secured credit card is reported to the major credit bureaus, meaning you can build your credit score by using one.

Typically, secured credit cards are more accessible to new borrowers since approval is easier to receive in comparison to standard cards. Remember, less risk for the lender means they have an easier time approving your application.

1166 FCU offers shared secured Visa cards to help you reach your credit goals.

Get a student credit card

If you happen to be in school, there is good news! Student credit cards are generally easier to qualify for than standard credit cards and they cater to the needs of students. They have lower limits and higher interest rates than traditional cards, but they are a great way to develop positive financial habits while building your credit history and score.

How Long Does it Take to Establish a Credit History?

We live in an age of instant gratification, so I know many readers will want glowing credit scores by the end of the week or better yet overnight. In reality, it’s going to take some time. Luckily not as long as it would take to become a pro athlete like Simone Biles, but if you’re starting from nothing, you could establish a credit score in as little as three to six months. Of course, it will take longer to develop a high score, but everyone has to start at the beginning. Start today and achieve your financial goals sooner rather than later!

Talk To The Experts About Credit Scores

Have questions? We would love to answer them. 1166 FCU provides financial guidance for all of its members. Credit cards, loans, budgeting, etc. We offer the support you need to feel confident in making financial decisions.