How to Establish Credit With No Credit History

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2. Pay Bills on Time

Of course, getting approved for a secured credit card is only the first step. You must manage your credit responsibly too.

To build a strong credit score, pay your bills on time every month. Payment history makes up 35% of your credit score.

Timely payments add positive activity to your credit file and gradually increase your score. On the other hand, creditors can report late payments to bureaus once payments are 30 days past due. A single reported late payment can drop a credit score as much as 100 points.

Therefore, set up payment reminders so that you don’t forget due dates or automate your payments. If you run into hardship, contact creditors to discuss alternate payment arrangements.

3. Keep Low Credit Card Balances

Also, don’t carry high credit card balances. Credit cards are a type of revolving debt, and the amount of revolving debt you have makes up 30% of your credit score.

With that being said, maxing out your credit limit or keeping balances close to the limit can hurt your credit score.

As a general rule of thumb, only charge what you can afford and pay off balances in full each month. You should keep your credit card balance below 30 percent of your credit line.

4. Get “Credit” for Rent Payments

Another tactic to rebuild or build your credit is asking your landlord (or utility company) to report your monthly payments to the credit bureaus. These on-time payments can add positive activity to your credit reports, jumpstarting the process of building your credit score.

Landlords can report timely rent payments to Experian’s RentBureau, Rental Kharma, or Rent Reporters.

Likewise, you can get credit for certain utility payments. A free program called Experian® Boost™ lets you add mobile phone payments and utility payments to your Experian credit report.

5. Other Credit Scoring Factors

Keep in mind that it takes time to establish a good credit history. Your payment history and amount of revolving debt are two of the biggest factors making up your score—but they aren’t the only factors.

Credit scoring models also take the length of your credit history into consideration. This makes up 15% of your score. Therefore, it can take years of responsible credit use to achieve an 800 score.

Other factors include types of credit in use (10%) and new credit (10%). In which case, it helps to diversify your credit accounts. This includes having a mix of credit cards and installment loans. However, only apply for credit when necessary. This is important because new credit takes into account recent applications or inquiries.