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Establishing Credit

How Can I Get Credit If I Don’t Have Credit?

Dear Experian,

I have no credit—nothing good, nothing bad. I can't even get a $1,000 loan. My bank offered me a secured credit card. Is that something that'll build credit? I also have years of utilities paid on time. How do I get them to report the good payment history to the credit agencies?

- DJA

Dear DJA,

If you've never used credit, you won't have a credit report, which means there's no information available to calculate a credit score. That can make it difficult to get approved for traditional lines of credit on your own, but there are still ways you can begin to establish credit in your name.

Will a Secured Card Help Me Build Credit?

If your bank turned down your application for a traditional credit card but offered you a secured card instead, that can be a very good place to start. Ask your bank whether they report their secured accounts to the credit reporting companies, as not all do. If the lender does report these accounts, and you make all your payments on time, that positive payment history could immediately help you establish credit.

Even if your bank doesn't report secured accounts, if you demonstrate that you can manage the account responsibly by keeping your balance low and making all your payments on time, they may eventually be willing to convert the account into a traditional credit card.

Adding Utility Payments to Your Credit Report

Utility and telecom payments, such as your cellphone bill, are traditionally not reported to the credit bureaus. Experian, however, now offers a free service called Experian Boost that allows you to improve your credit scores instantly when you add your positive utility, cable and cellphone payments to your credit report.

When you sign up for Experian Boost, you will be asked to link your bank account so Experian can find those on-time payments, going back as far as 24 months, and add them to your credit file. Once the payments are added, you will receive an updated FICO® Score . The entire process is secure and takes just minutes to complete.

You must have an existing credit report with at least one active account to have your utility and telecom payments added with Experian Boost.

How Else Can I Build Credit?

Opening a secured credit card and signing up for Experian Boost are great ways to start building and improving your credit. Here are some other ways you can begin to establish a positive credit history:

  • Ask someone to cosign. Getting a family member or close friend to cosign for you may help you qualify for a small loan or credit card account. Keep in mind that both the primary account holder and the cosigner or joint account holder will be equally responsible for the account. That means that any high revolving balances or missed payments will hurt not only you, but also the person who is taking a chance and cosigning for you.
  • Get added as an authorized user. If you don't have a cosigner, consider asking someone you know well to add you as an authorized user on their credit card. An authorized user is someone who has permission to use the account but is not responsible for making payments. If you are added, having that account history appear on your credit report can help you begin establishing credit. Not all lenders report their authorized user accounts to the credit bureaus, so check with the bank first.

Thanks for asking.
Jennifer White, Consumer Education Specialist

This question came from a recent Periscope session we hosted.

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