Best Ways to Build Credit with No Credit History: Secured Cards, Loans & More

 

Building credit from scratch can feel like a daunting task, especially if you have no credit history. Without a credit score, getting approved for loans, credit cards, or even a rental lease can be challenging. However, there are several alternative ways to establish credit and start building a strong financial foundation. This guide will explore effective strategies such as secured credit cards, credit-builder loans, rent reporting, and more to help you get started on the right path.

Why Credit Matters

A good credit score opens doors to better financial opportunities, including:

• Lower interest rates on loans and credit cards.

• Easier approval for rental applications.

• Access to higher credit limits over time.

• The ability to secure utilities and cell phone plans without deposits.

If you're just starting your credit journey, don’t worry—there are practical ways to build credit responsibly.

1. Apply for a Secured Credit Card

A secured credit card is one of the easiest ways to establish credit. Unlike traditional credit cards, secured cards require a refundable security deposit that acts as your credit limit.

How Secured Credit Cards Work:

• You deposit a specific amount (e.g., $200–$500) as collateral.

• You use the card for small purchases and pay your balance on time.

• Your payments are reported to the major credit bureaus (Experian, Equifax, TransUnion).

• Over time, consistent, on-time payments help build your credit score.

Recommended Secured Credit Cards:

• Discover it Secured Card – No annual fee and cashback rewards.

• Capital One Platinum Secured Card – Requires a low deposit and offers a path to an unsecured card.

• Citi Secured Mastercard – Reports to all three credit bureaus.

2. Take Out a Credit-Builder Loan

A credit-builder loan is designed specifically for those with no credit history. Unlike traditional loans, you don’t receive the loan amount upfront. Instead, the lender holds the money in an account while you make monthly payments.

How Credit-Builder Loans Work:

• You apply for a loan (typically $300–$1,000).

• The lender places the funds in a locked savings account.

• You make fixed monthly payments over 6–24 months.

• Once the loan is paid off, you receive the funds, and your positive payment history is reported to credit bureaus.

Where to Find Credit-Builder Loans:

• Local credit unions and community banks.

• Online lenders like Self, Credit Strong, and MoneyLion.

3. Report Rent and Utility Payments

Rent and utility payments usually don’t appear on your credit report unless you take action to report them. Fortunately, some services can help you get credit for on-time payments.

How to Report Rent and Utilities:

• Use rent-reporting services like Experian Boost, Rental Kharma, or RentTrack.

• Some landlords report payments to credit bureaus through platforms like ClearNow and PayYourRent.

• Utility and phone bills can be added to your credit profile with Experian Boost, which factors in payments for electricity, water, and streaming services.

4. Become an Authorized User on a Credit Card

If you have a trusted family member or friend with a good credit history, they can add you as an authorized user on their credit card. This allows you to benefit from their positive credit history without being responsible for payments.

Benefits of Becoming an Authorized User:

• The primary cardholder’s positive payment history can improve your credit.

• No credit check is required to be added.

• You don’t have to use the card to benefit from its history.

Important: Choose someone who maintains low credit utilization and makes timely payments to maximize the benefits.

5. Use Alternative Credit Services

Some alternative services can help you establish credit without traditional credit cards or loans.

Examples of Alternative Credit Options:

• Experian Go™: Helps individuals with no credit history create a credit profile.

• Tomo Credit Card: Requires no credit check and uses income-based underwriting.

• Chime Credit Builder Card: A secured credit card that doesn’t require a credit check.

6. Get a Co-Signer for a Loan or Credit Card

If you need access to a loan or credit card but lack credit history, a co-signer with good credit can help you qualify.

How Co-Signing Works:

• The co-signer shares responsibility for the loan or credit card.

• If you miss payments, it affects both your credit scores.

• This method can help you qualify for better terms and interest rates.

7. Maintain Good Credit Habits

Once you’ve started building credit, maintaining good financial habits is crucial to long-term success.

Key Credit Habits to Follow:

• Make on-time payments – Payment history is the biggest factor in your credit score.

• Keep credit utilization low – Aim to use less than 30% of your available credit.

• Check your credit report regularly – Use AnnualCreditReport.com to monitor your progress.

• Avoid opening too many accounts at once – Each credit application results in a hard inquiry, which can temporarily lower your score.

Final Thoughts

Building credit from scratch is entirely possible with the right strategies. Whether you choose a secured credit card, credit-builder loan, or rent reporting, consistency is key. Start small, make on-time payments, and monitor your credit score regularly. By following these steps, you’ll be on your way to a strong credit history and better financial opportunities.

Full Disclosure: Thanks for reading! Just a quick note: This article is not sponsored by any of the companies mentioned, and all recommendations are on my own, based on either my own experience or dedicated research on the subject.