By Dana Dratch
WWR Article Summary (tl;dr) If you have limited or no credit, there are strategies you can follow to establish, re-establish or beef up your credit file.
Limited or no credit? You’re in good company.
The Consumer Financial Protection Bureau says 1 in 10 adults is “credit invisible,” meaning they have no established credit with a nationwide reporting agency. Another 8 percent have insufficient credit history or one that’s too old to track.
Many times, consumers with no credit history are new to the world of credit. They can find themselves in a Catch-22 scenario, says Jennifer Tescher, president and CEO of the Center for Financial Services Innovation in Chicago.
“You need to have a credit history to get credit,” she says. “And you need to have credit to build (a) credit history,” she says.
A “thin file” means you don’t have much of a track record with credit. Either you have only a few accounts, your credit is relatively new, or both. These consumers may be unable to qualify for unsecured credit cards or “instant” in-store accounts,
If you have limited or no credit, here are six strategies you can follow to establish, re-establish or beef up your credit file.
DON’T GO CRAZY WITH THE CREDIT APPLICATIONS
Some of the groups at risk for no credit or a thin file include young adults, the elderly (if they haven’t used credit in a while), new immigrants and people who avoid credit.
Working to establish credit? Go slow, be very selective in your applications and nurture existing accounts. Never pay late, and, with credit cards, keep balances reasonable.
Filling out multiple applications could hurt your credit, and raise red flags with card issuers.
LOOK TO A SECURED CREDIT CARD
Your thin credit history may not be robust enough for you to qualify for an unsecured credit card.
One solution to build credit: a secured credit card, which requires a cash deposit that then becomes your credit limit.