Credit Report and Credit Score Analysis - Page 6

7. For those who have no credit history

Many folks do not have any or very little credit history and there are many reason for that.  If you were not born in the United States and emigrated over here later in your life, you probably don’t have any credit history since you did not have a social security number.  But often people born in the United States may have little or no credit history because they have never applied for credit. 

We believe the following steps are the best way for a person without credit to start building credit:

1.  Prepaid credit cards:  A prepaid credit card allows the you to pay the lender ahead of time and fill up the card with ‘credit’ that you can in turn use when you use the card.  These lenders often team up with either Visa or Mastercard and so you have the ability to use the prepaid credit card at any location that accepts Visa or Mastercard.  Eventually you can use your spending history with the lender to request them to give you an actual credit limit and that his how you start building your credit history.

2.  Store charge cards:  Cards from department stores like Sears, Macy’s and others have been known to be relatively easy to procure and the reason for this is that store charge cards require the borrower to pay off the balances much quicker than traditional credit cards so while the store is extending credit to you it is doing so at much more conservative terms than say a traditional credit card lender.  Thus by using charge cards for a while you can develop a solid credit history and use that to apply to larger credit card lenders later.

3.  Credit Cards:  Once you have some established credit history with prepaid credit cards and store charge cards, many lenders will start offering you credit cards although with small lines of credit.  If you do well with small lines of credit eventually your credit limits will be raised by these lenders.

4.  Auto loans:  Not as easy to get as credit cards, auto loans require that you have some established credit history since the average auto loan is at least $7000 or more.  Auto loan lenders want to make sure that they are lending to someone who has an established credit history.

5.  Home loans:  The toughest loan to obtain is a mortgage.  A mortgage of course requires that you show proof of income, assets, solid credit history of timely payment on at least 3 to 4 accounts for over two years.  Once you get a home loan and make timely payments for an year or so, you will find that your credit scores improve dramatically.

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