What to Do When You Have No Credit History

Hi. I’m Christine and I’ve never had a credit card. <Hi, Christine.> I’ve also never had a loan in my name or done anything else that would give me “credit history.”

How in the name if 2013 did this happen?

I know. Everyone has had a credit card or a loan. But, since I was fortunate enough not to need student loans to pay for college and in my early twenties I avoided credit cards like they were the plague I made it to my mid-twenties with zero credit history. I was raised in a “don’t buy it if you don’t have money for it” kind of family. (With the exception of houses and sometimes cars.) I bought my first car cash from my dad for $1200 (my life’s savings at the time). I thought I was being smart. I was sure that avoiding credit cards and debt altogether was the best route to financial happiness.

But then I learned that you need credit history for more than buying things you don’t have money for.

Several years later I headed off to graduate school and insisted on living in this little crap hole of an apartment so I could pay all my own bills. It was great until I tried to have the utilities turned on and they ran a credit check. They said they could not turn on my gas because I had no credit history. I had to have my parents put the gas in their name. I was mortified. Fast forward another year or so to when I was living with my then boyfriend (now husband) and I needed to put the utilities in my name before he deployed (otherwise I would have had zero authority on the accounts while he was gone). They were happy to put them in my name…for a deposit of several hundred dollars. I couldn’t even be on the loan for our house because it would have sent our interest rate through the roof. So now here I am, in my mid-twenties, and still have NO credit history.

So what am I going to do about it? As I understand it, I have a few options.

1. Open a credit card with a co-signer.
This is an easy option since my husband has a good credit history. But I don’t like the idea of having to rely on someone else to build my credit history, even if it is my husband.

2. Take out a small loan with a co-signer.
Same benefits and drawbacks as above.

3. Get a “secured” credit card from a bank.
This is when you give the bank cash as “collateral” and the card’s limit generally equals the amount of cash you have given them to open the card. The best thing is that these cards exist for the purpose of building or improving credit so every payment is reported to the credit bureaus. The only catch is that even one missed/late payment could really hurt you.

So what am I going to do?

My plan is to go the secured credit card route. I’m very good about paying my bills on time and am very careful with my money. I plan on using it pay for gas, an expense I budget for anyway. That way I know I’ll use it regularly and have to make payments on it regularly.

Has anyone else experienced this problem? What did you do?

About Christopher

Comments

  1. I experienced something like this in college. Then when I was approved for a student loan they only approved me for 250 dollars. You cannot buy too much with 250.00

    Were you successful going this route???

  2. My sister is having this problem right now. She doesn’t have any credit and can’t get approved for anything!

    • Hi Michelle, Same here.. my sister is also going with the same problem..

      Thanks Chris and for this lovely piece of article.

      Cheers!

    • Maybe try the secured card route? (if she has a relationship with a bank) or getting a cosigner on a regular card. It’s surprising how tough it is to get that first line of credit!

  3. I established credit history by being an authorized user on my mother’s credit card. Everything about the card was the same (numbers, expiration date, etc) except my card had my name on it. We went that route because I was studying abroad and didn’t want to take the risk of someone not accepting the card because the names didn’t match which could leave me stranded in a foreign country. It didn’t occur to anyone that doing this would establish credit history too. Because the card was in my name, whenever the bill got paid by my mom, it was like I was paying the bill. Because my mother is good with money and always pays her card in full, I ended up with excellent credit history and was able to get a super low interest rate when I bought my house.

    This isn’t much help to anyone who is financially independent, but it is something to keep in mind when thinking about your children’s credit history or when a college student is seeking advice on how to build credit.

  4. Secured credit cards are a great way to build credit. Thanks for sharing.

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