4/3/2023
Much of the economy depends on access to different forms of credit. In the United States, when you don't have a credit history, it will be more difficult to get a loan (you can find loans with no credit) or any form of financing, even renting a home or getting Internet service.
If you just turned 18 or don't have a credit score yet, you have several ways to start your credit history.
Establishing a good credit score takes time, so you shouldn't worry about how long it will take. It's more productive to focus on knowing the factors that determine a good score and incorporating good financial habits.
The first thing to do is to start your history, for which you can choose among several alternatives that we will explain here:
Become an authorized user
There are friends or family members who may be able to do you the favor of adding you as an authorized user of a credit card. This means that your payment history will be included in your report to the bureaus.
This reduces the time to start generating your FICO score, which is an advantage if you are a person who has just come of age.
The most important thing is that the credit card holder has a good record as a punctual payer and that the company issuing the plastic reports the authorized user's activity. Also, you don't even need to have the credit card in your possession or use it on a discretionary basis.
Ask for a secured credit card
This is another easy way to build your credit history from scratch. For these instruments you only need to make an advance deposit in a special account that functions as your limit and as collateral.
The minimum and maximum amount will depend on the bank where you do this procedure. Generally, the lowest amount to start with is $200.
Secured credit cards work just like regular credit cards, allowing you to buy/pay at thousands of merchants. Once you close the account, you get your deposit money back.
You don't have to use it forever, nor is it recommended because of its higher cost; its purpose is to jump start your credit history or improve your score so you can access an unsecured product.
Get a credit builder loan
There are financial institutions, such as credit unions, that let you take out small loans to get your credit history started. They deposit the funds in a savings account blocked by the lender and you pay the installments over time.
The amounts they usually give you range from $300 to $1,000 and each time you pay (on time or not), it is reported to Equifax, Experian and TransUnion. After you finish repaying, you can access the frozen money.
Use a co-signer or guarantor to start your history
This option is a bit like the authorized user. When you tell someone who has a good reputation to be your cosigner, you have a better chance of accessing a loan. In other words, you take advantage of the cosigner's credibility as a backer or guarantor against an application.
The difference with respect to the authorized user is that you have to pay the monthly payments established in the contract. Likewise, if you can no longer afford the loan, the co-signer must assume responsibility for your default.
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Remember that any negative record remains in the history of both, so you must assume this commitment responsibly.
Start your credit history with bill payments
Among the most direct ways to start your credit history in the U.S. are rental reporting services. Companies like LevelCredit and Rental Kharma receive the bills you are paying and include them in your credit file, which helps you have a positive record of on-time payments.
Of course, not all scores take this into account, but you can still get a credit card or loan to build your reputation. There's also Experian Boost, which lets you include your cell phone or utility bill on your credit report from that company.
Assume good financial practices
To have a FICO score, you will need to have an account open for 6 months or more. This also applies to the creditor who is reporting your behavior to the bureaus. Although less popular, you can get the VantageScore faster (1 or 2 months).
Along with the above, incorporate these practices:
- Pay your loan or credit card payments on time and if you can pay more than the minimum.
- Keep your credit utilization low on all the credit cards you have: don't let it exceed 30%.
- Do not close your credit cards unless you have a strong reason to do so, such as poor service or a high annuity.
- Try not to make too many applications at the same time or in a short period of time. It is best to wait 6 months.
Starting your credit history is a process that requires patience and awareness. And once started, increasing your score is something you should do calmly and taking good care of your finances so as not to be penalized, since recovering will cost you even more work.
Español: ¿Cómo empezar mi historial crediticio en Estados Unidos?