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6 Simple Ways to Build Credit if you dont have a Credit History

April 21, 2023

Table of Contents

    Table of Contents

      Have you been waiting for the bank to approve your new credit card but your application got rejected? The reason being inadequate details in your credit history? We get the feeling, but do you know, such issues are common among new applicants or first-time borrowers.

      On the other hand, building your credit score can be a difficult task. It becomes hard to get a loan, credit card or even a house without a good credit score. You need a good credit score to get a wide range of credit cards and fast loan approvals. To even get a credit card, lenders need a statement of your credit history. Hence, building credit with no credit history can be tricky. But don’t worry, we at Jar are here to help you.

      Let’s start off with understanding the basics first.

      What is a Credit Score?

      Credit score is a metric that banks and other lending institutions use to assess your capacity to repay loans and obligations. It reflects your financial stability and is based on your financial information. Your credit score is significant whether you are applying for a loan, purchasing a car, renting an apartment, or obtaining a credit card. 

      An ideal credit score is between 700 and 900 points. The score is based on the information in your credit report, such as your payment history, the amount of debt you owe, and the length of time you've had credit. The higher your credit score, the more likely you are to get approved for loans with low interest rates.

      Read more about how to build a good credit score here.

      What does Established Credit mean?

      For building a good credit score, you must first establish credit. Now what does that exactly mean? Establishing credit entails securing a loan or line of credit to start your credit history. You only need this information to obtain your first credit report and score. It's also the first step toward qualifying for a decent mortgage, auto loan, or other loan in the future. 

      Now, due to a lack of information about borrowing money and repaying debts, it is often difficult for first-time applicants or financially solvent persons to obtain credit. Here are some ways how you can establish credit with no credit history:

      1. Secured Credit cards
      2. Acquire a Credit Builder Loan
      3. Use a Co- Signer
      4. Become an Authorised User
      5. Get Credit for the Bills you Pay
      6. Practise Good Credit Habits


      1. Secured Credit Card

      Kick start your credit score journey with a secured credit card. A secured card is one which requires you to make a cash deposit against your credit card limit. The amount of deposit can vary from one lender to another. Similarly, some lenders do offer credit cards with zero deposits too. You can use the secured credit card for paying rent, buying groceries or household utilities etc. as you do with your normal credit card. And remember to fetch the security deposit which will be refunded on the dissolution of your account.


      But hold on! You cannot depend on a secured credit card for a long period of time. Since a secured credit card is recommended only to build your credit score. Prefer opting for an unsecured credit card for better benefits and zero deposits.

      2. Acquire a Credit Builder Loan

      Credit-builder loans are also known as ‘Fresh Start Loans’ or ‘Starting Over Loans’, designed for people with no credit history. Such loans are offered by small scale financial institutions like credit societies and urban banks. The basic criteria to qualify for such a loan are sufficient flow of income.

      Usually, the amount you borrow is withheld in a bank account while you incur expenses. You can access the money until you clear the loan amount. The advantage is your savings and credits are working in-sync with each other. This method also acts as a safety barrier to the lenders who are risking by lending money to the people with no credit score. Your payment information is passed on to the credit bureaus that are responsible for building your credit report.

      3. Use a Co-Signer

      You can get a loan or an unsecured credit card using a co-signer. A co-signer is a person who undertakes the legal obligation to act as a backup for repayment of the loan.  You can put forward your spouse, your parents, or a close family friend to act as a co-signer. A co-signer is responsible for the full repayment of the borrowed amount in case you fail to make the payment.

      4. Become an Authorised User

      Becoming an authorised user is one of the best strategies for improving credit score quickly. Nominate your family members or close circuit friends as authorised users. The primary user of the card requires a record for regular payments and maximum credit limit. The authorised user must act cautiously and be free from any kind of flaws which adversely affects the credit score. 

      Such practices are useful for newbies who are at the initial stage of building credit. You are not compelled to own the credit card to procure the benefits of being an authorised user. To safeguard yourself, be clear and precise with the terms and conditions with the primary user before striking the deal.


      5. Get Credit for the Bills you Pay

      Do you know, some lenders propose to record your utility bill payment details? Yes, the payment details are included and exhibited on your credit report in order to assist you in developing a good credit score, to get a loan or credit card. These services contribute to establishing your credit history for all moneylenders.

      6. Practise Good Credit Habits

      Practice makes a man perfect because regular practice brings in perfection. Why not apply this concept to develop better credit routines? Make way and adopt these good credit habits to build decent credit score:

      • Do not delay in clearing your dues. Make it a habit of clearing your credit card dues or loan instalments within the stipulated time period. Unnecessary delays can affect your credit score.
      • Less is more. Minimise the use of credit cards. Set a limit of 20-30% on credit card utilisation. This practice assures you to improve your credit score.
      • Dive-in deep to secure the best credit card suitable for your requirements. Settle for one credit account since retaining several credit accounts can hurt your credit score severely.
      • Avoid terminating your credit card account. Since it can adversely affect your credit utilisation and credit score too.

      Many people use credit cards to establish credit as a healthy habit. Credit cards, on the other hand, have some limitations. So look into alternative choices such as obtaining auto loans, borrowing from low-income lending agencies, and obtaining secured loans from banks and financial institutions. This enables you to secure a loan at a reasonable interest rate while also providing positive feedback to the three credit agencies. In reality, financial experts advise that if you want to create good credit, you should use a credit card responsibly.

      Don’t miss out the trick to increase your credit score with different types of credit.