From no credit to good credit

By Jeremy M. Simon

You've got no credit, although you know you need to get it.  But it's easy to feel like you're stuck when you realize that you are unable to get credit because you've never had credit, and you've never had credit because you can never get credit. 

With a problem like that, you may prefer to consider whether a tree that falls in the forest makes a sound if nobody is around to hear it.

Thankfully, it isn't impossible to go from no credit to good credit if you know what to do.  By using the following strategies, you can begin to build a credit history you can be proud of.

You can begin establishing credit with a small loan or line of credit from your bank, or a credit card designed for people with bad credit. 

When applying for a loan, it should help if you are able to put together a large down payment.  To get approved for a credit card, you will need to at least 18 years old with a steady source of income. 

In either case, make sure the bank or card issuer reports to a credit bureau.  It will not help you establish credit if they do not.

Also, consider applying for a secured credit card, which requires a down payment.  After a few months of using your secured card responsibly, it may be possible to qualify for an unsecured credit card. 

Once you are ready, avoid applying for many credit cards at the same time. Also avoid applying for cards you are likely to get rejected for.  Both too many applications and being turned down can make you look bad to lenders.

If you are unable to get a small loan or a credit card in your own name, see if a close friend or family member will co-sign for you.  Be sure to let this person know that you plan to be responsible about making payments on the loan or credit card.

For those consumers who don't have a checking account, opening one will give you credibility in the eyes of lenders.  If possible, set up a savings account, also.  Keep tabs on how much money you have in order to avoid overdrawing funds from your bank account.

Meanwhile, be aware that lenders and credit card issuers look at more than just your payment history when issuing credit.  Other factors include how frequently you move and how often you change jobs.  It can also help to have an apartment, utility, and telephone number in your own name.

Regardless of the strategy you choose, be sure to always make payment to lenders on time.  With credit cards, try to make more than the minimum monthly payment.  Such responsible borrowing will get you on the road to good credit in no time.

Published: May 18, 2007

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