4 Ways to Establish Credit

Almost 20% of Americans have no credit history according to UnidosUS. Latinx folks are actually almost twice as likely as whites to be credit invisible. You may not realize it, but you need good credit to rent an apartment and obtain a mortgage. So how do you start building your credit without any credit history? Below are four easy ways you can get started.

1. Authorized User – To get a credit card on your own you must be at least 21 years old and if you’re 18 you have to have a co-signer or show steady proof of income. If you’re under 18, a parent can add you as an authorized user on their account. If you go this route just make sure your parent has a good credit history and pays their bills on time.

• Retail Card – At one point in our lives we’ve all signed up for a store credit card. Retail stores typically approve applicants with no credit but note you can only use the card at their stores. I advise reviewing their offering and if you sign up for a card make sure you don’t carry a balance. Retail stores cards are notorious for high interest rates so if you don’t manage it well it can negatively impact you.

• Student Loans – Managing your loans well will positively impact your credit score. That is because all payments get reported to the credit bureaus. Similarly make sure you pay your bills on time as well. If you miss payments it can go to collections which will bring your credit score down.

• Secured Credit Card – To obtain a secured credit card, you need to make an upfront deposit. Your deposit will typically equal your credit limit so a $300 deposit will get you a $300 credit limit. These cards are easy to qualify for and can be used for everyday purchases. You can apply for a secured credit card at Bank of America and Capital One for example.

While building your credit history is great, make sure you take things slow. Get comfortable managing one card, making a budget, and paying your bills on time. As you become more responsible you can scale and leverage your credit into other things like purchasing a home or starting a business to build wealth. Just always remember to keep an eye on your statements and credit reports. A high credit score can open the door to many opportunities. A low one can close them.