Credit score creation from the point of view of a consumer who has no file at all with the 3 major credit reporting bureaus presents interesting and unique challenges. How does a consumer start credit score creation from nothing? Young adults, immigrants and those with a cash only philosophy until it comes time to buy a house are deeply concerned about how to begin to prove themselves with the credit bureaus. These people are classified as “credit invisibles” by credit reporting industry professionals.
Credit Score Creation Swift
If done properly the news about credit score creation is not all bad by any means. After all there are no negative entries to be cleaned up just like there are no positive entries proving the consumer’s responsibility when it comes to handling the credit they do have. In order to achieve any credit score at all there will be a waiting period for entries and reports to be analyzed. In order to move quickly into the good to excellent credit scoring category there will need to be a mix of types of credit all being handled responsibly. So how does a new to the system consumer begin to let the credit reporting agencies know that they actually exist?
Best Credit Score Creation Tactics
In order to score an individual FICO requires at least one trade line (credit based account) that is open and not in collection or dispute. That or a different trade line must also have activity reported in the last 6 months.
The following is a list of the best credit score creation tactics. It is not necessary to do them all right away. This process is a marathon, not a sprint.
There is a new company hoping to fill the niche of professionals relocating to the United States from other countries who need to establish credit from scratch. Even people who do not yet have a social security number can start the credit building process. Visit https://www.creditstacks.com/ for more information regarding their program having potential usefulness for you.
If you have a friend or relative you can approach about making you an authorized user on one or more of their credit cards the history of that card regarding age, regular payments, low debt to available credit ratio and credit limits will be attributed to you as well. But so will any bad history. It is not easy to approach someone about this. Assure them you don’t want your own card, don’t want to know the account number and that your history does not flow back to them. It’s a one way street!
The cards report monthly to the major credit reporting agencies right after the statement closing date. This strategy will get you off the starting blocks in a hurry.
Secured credit cards are cards that require you to deposit your limit. When you get close to using it up you will need to put in more money. These cards report to the credit reporting agencies every month just like normal credit cards. After 6 months or more of responsible use you will probably become eligible for real credit cards with low limits to continue proving your responsibility. This is how you work your way up the credit ladder towards better cards with higher limits and more benefits in the future.
Secured cards are not always available to totally invisible people. It’s worth trying because they really help. Secured cards are available from many companies. Green Dot is very lenient about giving newcomers a chance. Bigger companies like Capitol One also have them. You can find an assortment of offers at credit karma. Don’t forget to try your own bank or credit union as well. Most have a $300.00 minimum or you can deposit more if you like.
Credit Builder Loans
Most banks or credit unions offer programs for their depositors to use a CD as security for an installment loan. The consumer makes payments regularly on a small loan which the bank reports to the credit reporting agencies. There is no risk to the bank as the consumer works on establishing a solid track record on the loan.
There is an amazing program at Self Lender… https://www.self.inc/ offering consumers credit builder programs where they pay into a savings account which they can cash in at the end of a 2-3 year program. Each payment to their own savings account is recorded as a successful installment loan payment. Check out this amazing program. You can start for as little as $25.00 a month. This adds an installment loan to your “mix” of types of credit which is 10% of your score.
Many department stores are lenient about issuing cards to newcomers to the credit system. If you get one treat it with respect because it will hurt you if you don’t. Many do not report to all 3 credit reporting agencies. They are of limited value in regards to building credit.
Sub prime auto loans
Somewhere there is a car dealer that will give you an auto loan no matter how low your credit score is or even f you don’t have one. These loans carry very high interest and probably don’t report to more than 1 credit reporting agency. Not a preferred way to build credit but it’s there for those who have no choice.
Payday Loans
Payday loans do not report positive information to credit reporting bureaus. They do report you if you default. Don’t do this except in the most dire emergency. They just never work out. Stay away.
