How to build credit with no credit history

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If you don’t yet have a credit score, you’re not alone. It’s estimated that one out of every 10 adults who are eligible for a credit score doesn’t yet have one, according to research from FICO, which develops the credit score that the vast majority of lenders actually use.

Luckily, there are a lot of options for consumers to get started on their credit-building journey.

Do I have a credit score?

Not everyone has a credit score. For example, kids don’t have a credit score until they begin establishing credit as young adults. In order to find out if you have a credit score, it helps to know how it’s created and where to find it.

Where does a credit score come from?

Credit scores don’t just come out of thin air. When you open a credit account, oftentimes your lender will report that information to one or more of the three credit bureaus: Equifax, Experian or TransUnion.

After you have at least six months of credit history, you’re eligible for your first credit score, says Joanne Gaskin, vice president of scores and analytics at FICO.

“As an example, if someone opened a Target card seven months ago, they now would have a FICO® Score,” says Gaskin.

A FICO® Score is created using data on your credit report, and payment information isn’t all that goes into it. Here’s the exact breakdown, along with how much each credit factor contributes to creating a unique FICO® Score just for you:

• Payment history: 35%
• Amounts owed: 30%
• Length of credit history: 15%
• New credit: 10%
• Credit mix: 10%

How do I get my credit score?

There are a lot of ways to find out your credit score, and some are easier than others.

The easiest way to find out your FICO® Score is to see if your bank or credit union participates in the FICO® Score Open Access program.

“This is where lenders are already pulling FICO® Scores for account management purposes,” says Gaskin. “[They] can then turn around and share those scores for free with their customers.”

Another option is to create an account with myFICO or attend one of FICO’s Score A Better Future events, where their nonprofit credit counselors can pull your FICO® Score for free.

Also note that under the Fair Credit Reporting Act (FCRA), you can request a free copy of your credit report from each of the three major credit bureaus once a year via AnnualCreditReport.com. It’s important to check the information in your credit report to make sure there are no inaccuracies.

How do I build a credit score without any credit history?

“The most important thing to know is that you can build credit fairly quickly,” says Gerri Detweiler, education director at Nav, a business lending website. “I’ve seen consumers make significant progress building credit from scratch in as little as six to 12 months.”

The catch-22 situation of needing credit in order to get credit may still be there, but these days, there are plenty of ways to start building credit.

Add alternative data to your credit file

Even if you don’t have credit per se, you’ve probably already been regularly paying bills like rent, cellphone plan, Netflix and others. Generally, these companies don’t reward you by reporting your on-time payments to the credit bureaus, even though that could really help you.

That’s been changing lately, though. FICO has FICO® Score XD (developed in partnership with LexisNexis® Risk Solutions and Equifax®) and UltraFICO™ Score, which uses nontraditional credit data to help you grow your credit.

Other companies are working on similar projects, too, such as Experian Go™, which lets people launch their own credit files and add more alternative data to them with Experian Boost™.

“What we’ve learned is that, when consumers use Experian Go™ and combine it with Experian Boost™, the average consumer gets a credit score of 665, which is a near-prime FICO® Score,” says Wil Lewis, global chief diversity, equity & inclusion officer at Experian.

Become an authorized user

The quickest way to start building credit is to find a friend or family member who’s responsible with money and ask them if they would consider adding you to their credit card account as an authorized user.

This can add their entire credit history with that account directly to your file, and it’ll be treated exactly the same in creating your score as if you were the person managing the account the whole time. It’s not an approach that’s available to everyone, but if it is an option for you, it’s a good idea to consider it.

Detweiler has good advice on how to have these conversations with loved ones in your life.

“You could always approach it as, ‘Hey, don’t feel bad about saying no to this. I’ve researched this opportunity to build my credit. But if you’re not comfortable with that, don’t worry about it. I don’t ever have to touch the card, you don’t have to give it to me. Just adding me will help me build credit,’” Detweiler says.

Get a credit card

If becoming an authorized user isn’t an option for you, you can also try opening up a new credit card on your own.

“It’s just going to probably take a little bit more time [to get a FICO® Score] because it will be a brand-new account,” says Detweiler.

Most people without a FICO® Score aren’t able to qualify for a regular credit card right off the bat. Instead, if you don’t yet have credit, a retail store card or a secured credit card can be a good option because both are generally easier to apply for. If you’re a young person, you can also consider applying for a student credit card.

Find credit-builder loans

Another option is to take out a small credit-builder loan, which is available at many credit unions and local banks. They work similarly to a secured credit card where you put money in a savings account, get issued a loan and pay it back over the course of a few months.

“It’s another way to get positive [payment] information into the traditional credit bureau files,” says Gaskin.

Bottom line

Building credit when you don’t yet have credit can be difficult, but it’s well worth it.

“Ninety percent of the credit-eligible population gets a traditional FICO score,” says Gaskin, adding that FICO aims to expand consumers’ credit access even further.

With a little bit of research and intention, you can create a good credit score for yourself over time — no matter what your starting situation is.