How to get credit if you've never had credit?

Building Credit from Scratch: A Guide for Beginners

For individuals with no established credit history, obtaining credit can seem like a daunting task. However, there are effective strategies to build a positive credit profile from the ground up. One of the most efficient methods is to become an authorized user on a credit card belonging to a trusted friend or family member with a strong credit history.

Becoming an Authorized User

As an authorized user, you gain access to the primary cardholder’s credit card account. Your name is added to the account, and you receive a separate credit card that you can use to make purchases. Your credit activity, including payments, balances, and inquiries, is reported to the credit bureaus, which build your credit history.

Benefits of Being an Authorized User

• Positive Credit History: By being an authorized user on a credit card with a good payment history, you can establish a positive credit record. The positive activity on the account is reflected on your own credit reports, helping you qualify for credit cards, loans, and other financial products in the future.
• Increased Credit Limit: The credit limit on the authorized user card is often higher than what you could qualify for on your own. This can increase your overall available credit, which improves your credit utilization ratio – an important factor in determining your credit score.
• Access to Credit: If you have no other credit history, being an authorized user can provide you with immediate access to credit. This can be helpful for making essential purchases or establishing a payment record.

Choosing the Right Authorized User

It’s crucial to choose a responsible and reliable authorized user. The primary cardholder’s credit activity will directly impact your credit score. Consider the following factors when selecting an authorized user:

• Strong Credit History: The primary cardholder should have a consistent payment history and a high credit score.
• Responsible Spending Habits: The cardholder should manage their credit wisely, avoiding excessive debt or late payments.
• Trust: You should trust the individual to use the credit card responsibly and not engage in activities that could damage your credit.

Responsibilities as an Authorized User

As an authorized user, you share responsibility for the credit card account. It’s important to:

• Monitor Your Activity: Keep track of your spending and ensure timely payments are made.
• Make Payments on Time: Always pay the minimum payment due on the credit card statement by the designated date.
• Avoid Overspending: Stay within your available credit limit to maintain a low credit utilization ratio.
• Protect Your Information: Never share your credit card information with unauthorized individuals.

By becoming an authorized user on a credit card with a strong payment history, you can quickly establish a positive credit history and pave the way for future financial opportunities.