Tips on How To
Build a Credit History

How to Build Good Credit from No Credit

At AutoCenters Herculaneum, we talk a lot about bad-credit and no-credit car loans–but, if you have no credit, there’s a good chance that you just don’t know a lot about credit, how it works, and how to start building a strong history.

We’re here to help. If you have no credit, but you want to be able to score great rates on credit cards, car loans, and mortgages, we’ve got some tips to help you start. Here are 5 ways to build good credit if you have no history.

Secured Credit Cards

How does a secured credit card work?

This is cool–a secured credit card can be opened by someone with no credit, because your credit limit is typically the same as the deposit that you make to open it. Whether that’s $500, $1000, or more, your deposit acts as a safeguard if you can’t pay a payment.

How does this help build credit?

In a few ways: not only do you get 6 months or more of positive payments, but your responsible usage indicates to credit card companies that you’re a safe customer–then, you’ll be eligible for better cards with signup bonuses, cashback, and more. If you choose to leave the account open even when you’re no longer using it, you get to bulk up your average account age.

Credit Builder Loans

How does a credit builder loan work?

For this, you take out a loan–but, you don’t ever actually get the money. Say what? It sounds a little odd, but it’s true. Think of it like taking out a loan for your future savings account. You borrow, typically, $500 to $1,000 that is put into a secure account held by the lender. You may payments over a period of time (usually 6 months to 2 years so you keep payments very low) and pay some amount of interest.

How does this help build credit?

It works just like it sounds! You take out a loan for money that sits in the bank, you make on-time payments in full, and you build a positive history.

Co-Signers

How does a co-signer work on a loan?

If you’ve found the perfect car at our St. Louis area used car dealership, but you have no credit, you may be concerned about qualifying for a car loan. Firstly: don’t! We work with no-credit customers from Arnold, Fenton and Festus all the time. Secondly, though, you could consider asking a family member or partner to co-sign the loan with. You’re still responsible for paying, but a co-signer indicates to the lender that you have a backup plan for making payments.

How does this help build credit?

This helps because the good credit of your cosigner could help keep rates lower, and you have backup if you ever really can’t make payments–however, you get the chance to pay off a loan and make some solid credit history.

Rent Payments

How do rent payments work?

(Ok, this one is a given.) More than likely, you know how rent payments work. If you’re a renter in the St. Louis area, you mail a check every month to your landlord in order to remain a resident of the apartment. While renting a house or room isn’t necessarily like paying a loan, in a way it is–you commit to however many months of making payments, and then you pay in full.

How does this help build credit?

There are services that will track your rent payments–and even utility payments, in some cases–and report these on-time payments directly to credit trackers to help build a positive credit history. Sometimes these services are free, but even those with an annual fee won’t break the bank, and it will be well worth the value of a better credit score. Please note that not all credit bureaus will use this information, but some do–and you have to make rent payments anyway, right?

Authorized User Status

How do you become an authorized user on a credit card?

A credit card user, that you’re close to and trust, can add you to their card account as an “authorized user”, which gives you full use of the credit account through a separate card in your name. While you can charge purchases to the card, and will be able to make payments on the primary user’s behalf, you are not legally obligated to make payments. You want to make sure that you have a conversation with the primary user before you are added, so both of you are completely clear on how the card will be used, how you’ll make payments, and how much you can spend.

How does this help build credit?

This is a neat option for people who have a trusted partner or close friend who has better credit than them. Since you are not the primary user, and may not be making any payments at all, this won’t have a huge effect on your credit score. However, if you have absolutely no credit history, this can help you get that first foot in the door.

Keep on Building That Good Credit

Remember that good credit is not a one-and-done journey–it’s a process that’s going to keep changing as long as you continue to make payments, take out new loans, use credit cards, or pay your mortgage.

We have plenty more credit tips to help Kirkwood, Webster Groves and Ballwin drivers stay on track–like always making timely payments, and staying under 30% of your total credit limits. If you currently have no credit or bad credit, but you can’t wait around for a good score to grow, please contact the team at AutoCenters Herculaneum to see how we can help you. Secure the no credit or bad credit auto financing that you require