How to Establish a Credit Rating with Zero History

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Trying to get a loan or even rent an apartment without any credit history can be hard to nearly impossible. We’ve all started out with no credit history before, and it takes time to build a credit history. There are some ways you can start building a credit history, and the sooner it is done, the better.

What is Established Credit? 

An established credit rating shows that a person has used credit before and is a good credit risk. There are credit reporting agencies that follow our credit history throughout our lives. These companies know if we default on a loan, they know if we’ve paid on time, and they know how many times we’ve been late on a credit card payment.

All of this adds up to a credit score which is our credit rating. The better credit score a person has, the easier it will be to get a mortgage, a business loan, rent an apartment, or get an auto loan. The higher a credit score goes, the lower the interest payments will be on credit card debt, mortgages, and when refinancing an auto loan. A good credit score can save you money in the future.

According to Lantern by SoFi, “Essentially, auto loan refinancing is taking out a new loan to pay off your existing car loan. Depending on individual financial situations, applicants could qualify for a lower interest rate through refinancing—which could mean lower monthly payments and saving money in the long run.”

How to Build Your Credit History

To build a credit history, you have to use credit, and pay it off on time. The first thing a person needs to do is open a bank account and have a savings and a checking account. The next step is to apply for a credit card. The bank you open an account at can help you get a credit card, or you can apply for a store credit card.


Do not apply for too many cards. You don’t want a lot of credit inquiries on your credit report. If necessary, you might have to apply for a secured credit card at first, backed with money in your bank account. They will work to establish a credit history. 

Tips to Use Your Credit Effectively

Once you receive a card, you should start using it. Paying it off each month in full is a good habit to get into. Do not use the maximum amount of the card. Credit rating companies like to see a person use less than 30% of the maximum limit on the card. 

Using the card and paying it off on time, every month shows the credit reporting agencies that you are a good risk and a responsible user of credit. If you can’t afford something, do not use a credit card to pay for it. That is the quickest way to get into debt and lower your score.

As time goes on, the credit score will rise. When anyone looks at their credit report, they want to see all green, which means everything has been paid on time. Within a year of proper use, you will see your credit score increase.


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