No credit history – Tips on establishing credit when you have no credit history

Articles often reference consumers, who have bad credit, ignoring the growing population of people, who have no credit. This segment of the population of is an interesting group because it ranges from college students, who are starting to build their credit, to people who may not have credit because they were overseas. Some have little money and some have money.

Whatever your reason is, having no credit is a catch-22 problem. You need a line of credit to build credit but since you don’t have credit, no one wants to extend you a line of credit.

The best way to establish credit, if you have no credit, is to get a secured credit card. A secured credit card is the opposite of your traditional credit card. It requires you to create a savings account and put some cash into the account. The credit card issuer then gives you a line of credit based on about 50% to 100% of the money you have in your savings account.

For a list of widely used secured/prepaid credit cards click here.

When selecting a secured credit card, focus on those that offer a rich variety of customer perks including:

  • No Upfront Fees
  • Good customer service
  • Online banking. This is a good way to ensure that your bills are paid on time. You schedule an automatic payment and your bills go out to your creditors, like clockwork every month.
  • Rewards programs
  • Reports to the credit bureaus.
  • Once you get your secured credit card, stick to the following rules:

    1. Pay your bills on time – Always!

    2. Do not try to open up too many lines of credit.

    3. Do not max out your credit card. Most financial gurus advise using up to 70% of the line of credit and no more.