How to Build Credit If No One Will Give You a Chance

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Credit is a important part of our consumer-driven society. In most cases, you need a positive credit history to finance a car or a house. It can also have an impact in other ways; many insurance companies use credit scores as a factor in determining premiums. In order to establish credit, you'll need to acquire credit. Most of the time, in order to acquire credit, you need some credit. This is a difficult situation for many people. There is no fail-safe way to establish credit overnight; however, there are a number of things you can do to establish credit when you have none.

Strategies

  • Save a large down payment. A large down payment (40 percent or more) will help you qualify for financing on purchases, such as cars or other merchandise. The loan becomes lower risk with a large upfront investment, which increases the chances of a lender making an exception. Establishing an installment account, such as an auto loan, will be a big step to building a credit profile.

  • Consider a secured credit card or a secured loan. Secured cards and loans won't help you if you need the extension of credit to improve your finances; however, it will establish an account and set you on the right path. With secured credit cards, you pay an upfront deposit to secure your account; the amount of the deposit becomes your credit limit. Secured loans work in the same manner; usually the money is placed in a specialty account, where it cannot be accessed until the loan is paid off.

  • Ask family or friends to help. Just because a creditor won't give you a chance, doesn't mean those close to you won't. If you have family members or friends with excellent credit, ask them to help you out by co-signing for you. The account will be reported to your credit report as a joint account; however, it will help you establish a credit history.

  • Ask the credit reporting agencies for help. Credit reporting agencies (Equifax, Experian and TransUnion) compile credit profiles for consumers. They receive their information from creditors, such as finance companies and credit card companies. While most creditors report account histories to the agencies, some do not. If you've ever had a positive account that went unreported, contact the credit reporting agencies and ask them to add the accounts for you. In most cases, they will, as long as the information is verifiable; however, a fee will probably be involved.

Tips & Warnings

  • An account must be opened for at least six months to give you a credit score. Accounts opened and paid in less than six months will show up on your report, however, they will not give you a credit score.
  • Manage your credit carefully. You can't build excellent credit overnight. Don't get credit-hungry. Be patient, acquire credit when needed and pay your bills on time.

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