How to increase the credit score without any credit?

27 August, 2014

It is well known that the only way to increase the credit score is to increase the credit limit and decrease the utilization. Paying off bills on time would also help. However, for the people with a very small or zero credit score, how would they start their credit history, without getting any credit?

Credit score and credit

The credit score and credit availability are closely related. The lenders are ready to give money to those with a good score and to get a good score, you should have some credits. Getting the loan from lenders who provide loans to the people with low credit score, would attract a very high interest rate and the other fees associated with them would also be high. It is not safe to take up that approach.

Credit card

The simplest way to start the credit history is to get a credit card. With no credit history, you would get a very basic credit card at the beginning. After six months, based on your bills and the income, the credit card company would increase the credit limit on the card. This would automatically increase the credit score and will also add credit history to the report.

Secured credit cards are provided for people with no credit history. These cards are easy to get and you need to make a deposit equal to the credit limit to get the card. This would ensure the credit card provider that they can get back the money if you default it. When you default the card, the credit card company would get the deposit money. As you get your credit history, you can close the secured card or upgrade it to non-secured one.

Ask your parents

Ask your parents to add you as an authorized user for one of their credit cards. Make sure that the credit card is not defaulted. This would add credit history to your report and would increase the credit score. Remember that the person who gives the credit card to you, would risk his/her credit report too. So, if your parents are in the plan to buy a house or make any big investments, it is better not to spoil their credit report by increasing the outstanding balance on the credit card.

These are the ways to increase the credit score for those who has no credit history. Do not fall for an unsecured loans or loans with high interest rate just for the sake of increasing the credit score. It might have a negative effect too.

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