News & Resources

Building credit history is almost never easy

Feb 19, 2013 Walt Wojciechowski

Many 18 year olds and new college graduates think that because they've never taken out a credit card or paid a bill late, they have pristine credit. They have never owed anyone money, nor have they borrowed. Those who have taken out loans for college (but aren't yet required to begin repayment) are often of this school of thought.

However, this often isn't the case. While it is true that those who have never borrowed or paid a bill late - like cell phone, medical or loan - do not have bad credit, they likely don't have any traditional credit history at all. This can be quite the shock when a lender lets someone know that they can't borrow because there is no evidence that the company will be paid back.

So what is a person with non-existent credit supposed to do when he or she wants to take out a credit card, apply for a mortgage or borrow for a large purchase? All is not lost, as lenders can offer advice to help such consumers start building credit. After all, if they become somewhat creative and are able to amass a credit score, the market for lenders will increase.

Choose the right credit card
Many consumers need a starter credit card to get the ball rolling with regular monthly payments. According to Life Hacker, it is often good for people to start off with a secured credit card. This requires the user to put down a deposit first, because a traditional carrier likely won't offer a card with a good interest rate to someone with no credit and experience using one.

Moreover, consumers should be aware that even if parents add their children onto an already established credit account, this does not always count toward a young adult's credit score, Money Life reported.

Use a PRBC score
There is another, potentially easier option for those who need relief but don't have the time needed to build up credit history. Many lenders are using Payment Reporting Builds Credit scores to determine credit worthiness and show that individuals have a positive history of repayment.

Lenders interested in expanding their enterprise should tell consumers to ask their utilities providers to report payments made on time. This can show responsibility making payments expediently and allow individuals to have access to credit.