How to Build Credit Without Actually Having Credit

If you’re young and starting out, cell phones, credit cards, car loans, and your first apartments are just facts of life. But, all these everyday necessities require good credit. How are you going to get the credit you need to finance life on your own without having a FICO score to start with? Don’t worry!

Secured credit cards can help you start building the credit you need to become financially established in life. With a secured credit card, there’s little or no risk for a bank or credit union to let you begin building your credit history with a secured credit card. The cash deposit you make to secure the card is usually equivalent to your credit line.

How Does it Work?

A secured credit card works like any other credit card. You buy what you want. You make a payment on or before the due date. If you don’t pay the balance off each month, you pay interest on the balances you carry forward to the next month. After six months of using your secured credit card, and making payments on time for six months, your payment history reported by the bank or credit union to the three major credit bureaus will translate into your very first FICO score.

Deciding on a Secured Credit Card

Now you have a credit history. But, what kind of secured credit card should you apply for? And yes, you will still most likely be limited to secured cards. If your bank or credit union doesn’t offer a secured credit card, there are other options, including Capital One. Depending on your credit, you can receive a $200 credit line for as little as a $49 deposit, all the way up to $1,000 depending on your payment performance later on. Not a bad start for your first credit card. The credit line is high enough to be able to do something with, but not so high that you can get into serious trouble as long as you have a part-time job.

If you can’t come up with the entire deposit all at once, Capital One gives you a few months to come up with the money. With this card, as long as you make the first five payments on time, you’re eligible for an unsecured credit line increase. In order to apply for this credit card, however, you must have a checking account with your bank or credit union. There’s no annual fee, but the but the nearly 25% annual percentage rate serves as an incentive not to charge more than you make, and pay the balance off each month.

There are plenty of other secured credit card programs out there, though, and you can find out more here. Secured credit cards, like these, are a great way to start building your credit, so when it comes time to put your cell phone in your own name, or get a car loan, even your first apartment – you’ve built a solid credit foundation that lets you sign your name and get what you need!

Leave a Reply

Your email address will not be published. Required fields are marked *