If you’ve never had a loan or a credit card, you’re considered credit invisible. You may find that potential lenders consider having no credit to be just about as bad as having bad credit. How do you get past the hurdle of having no credit? Read on if you’re credit invisible: what to do if you have no credit.
Your First Credit Card
If you have no credit history, it might seem challenging to be approved for your first credit card, but it’s really not that hard. Several different types of credit cards are open to people who haven’t yet established a credit history. These include:
- Secured card. For this type of card, you’ll deposit funds into a bank account which is held as security for the money you borrow. In most cases, your credit line is equal to the amount of money you deposited, so if you have a $500 security deposit, you have a $500 credit line. Using this card gives you a chance to show that you’ll pay bills as agreed.
- Student card. If you’re a college student, you’ll find that there are credit cards geared to college students. These cards are unsecured and may offer rewards for good grades.
- Retail store card. Many retail stores have their own credit cards, and they typically have more lenient approval requirements than other cards. This type of card may have a low credit limit and a high-interest rate, but it gives you a chance to establish a good credit history.
No matter what card you start with, make sure you understand what terms you’re agreeing to. Cards aimed at risky borrowers often have a high-interest rate and may have other fees such as an annual fee.
Your First Loan
A student loan is the first form of credit that many people have. Many student loans don’t require a credit check when you apply for them.
You may have difficulty getting approved for an unsecured loan with no credit history. If you have a friend or relative that’s willing to cosign a loan for you, this will help you build a credit history. A cosigner is responsible for making payments on the loan if you don’t pay as agreed, so not everyone is willing to act as a cosigner.
Credit Building Loan
A credit building loan is a way to build credit in 12-24 months. It holds the amount borrowed in the bank until you have made all your payments, which allows you to build credit and savings at the same time. Another type of credit building loan is a small line of credit which allows you to make monthly payments and build your credit.”
Taking Care of Your Credit
Once you have obtained your first credit card, always pay your payments on time. Pay more than the minimum payment whenever you can and avoid borrowing more than you can pay back. Paying a payment late can be very damaging to your credit score.
Look at your monthly bills each month to make sure no one else has made charges on your account without your knowledge. Get a copy of your credit report each year from AnnualCreditReport.com and make sure your payment history and balances are being reported correctly.
Any errors you find on credit card statements or your credit report should be disputed as soon as possible. If you need help with this process, consider working with Dovly. We’re an AI credit engine that can help you track, manage and fix your credit. Try it risk-free with our free membership tier.
