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While no credit history is better than having bad credit, both situations can hold you back. No credit makes it harder to get a credit card, loans, and even rent an apartment. And if you’re approved for financing without a credit score, you’ll likely pay a higher rate compared to an applicant with good credit.
Thankfully, insufficient credit is fixable. Here’s what to do if you’re looking to build your credit history.
1. Apply for a secured credit card
Some people run into a unique challenge when establishing their credit history. It takes credit to build credit—but it’s often difficult to get approved with no prior credit history. As a result, some people apply for numerous credit cards, only to receive rejection after rejection.
The problem, though, isn’t that they’re applying with no history—but rather they’re applying for the wrong type of credit card.
One of the easiest ways to build credit from scratch is to apply for a secured credit card. These are issued by some financial institutions and require a security deposit. Secured credit cards are ideal because they don’t require a credit history.
This is how secured credit cards work: Complete an application and pay a security deposit. If you’re approved, you’re issued a credit card with a credit limit of equal amount. If you pay a $500 deposit, you’ll get a credit card with a $500 credit line.
This deposit isn’t prepayment for the credit card, though. So you’ll receive a monthly statement and you’re required to make minimum payments.
If you’re looking for a secured credit card, apply for the Chime Credit Builder Secured Visa® credit card. This card can help establish, build, or rebuild your credit with no annual fees, no interest~, no credit check, and no minimum security deposit,² which is required with most secured credit cards. (Chime Checking Account and $200 qualifying direct deposit required to apply.¹)
But Chime doesn’t only offer the Credit Builder Secured Visa® credit card. Chime is an award-winning financial app & debit card that millions of Americans use to manage, save, and spend their money. It can provide you with resources to make smart money moves that promote financial well-being and a general sense of peace of mind.
Features include:
- Fee-free overdraft up to $200* on debit card purchases, and cash withdrawals with SpotMe® for eligible members. It’s like overdraft protection—but better.
- Get your paycheck, benefits, and stimulus checks up to two days earlier^ with direct deposit.
- Access to over 60,000 fee-free in-network ATMs.
- There are no monthly fees, no maintenance fees, no minimum balance requirement.
2. Pay Bills on Time
Of course, getting approved for a secured credit card is only the first step. You must manage your credit responsibly too.
To build a strong credit score, pay your bills on time every month. Payment history makes up 35% of your credit score.
Timely payments add positive activity to your credit file and gradually increase your score. On the other hand, creditors can report late payments to bureaus once payments are 30 days past due. A single reported late payment can drop a credit score as much as 100 points.
Therefore, set up payment reminders so that you don’t forget due dates or automate your payments. If you run into hardship, contact creditors to discuss alternate payment arrangements.
3. Keep Low Credit Card Balances
Also, don’t carry high credit card balances. Credit cards are a type of revolving debt, and the amount of revolving debt you have makes up 30% of your credit score.
With that being said, maxing out your credit limit or keeping balances close to the limit can hurt your credit score.
As a general rule of thumb, only charge what you can afford and pay off balances in full each month. You should keep your credit card balance below 30 percent of your credit line.
4. Get “Credit” for Rent Payments
Another tactic to rebuild or build your credit is asking your landlord (or utility company) to report your monthly payments to the credit bureaus. These on-time payments can add positive activity to your credit reports, jumpstarting the process of building your credit score.
Landlords can report timely rent payments to Experian’s RentBureau, Rental Kharma, or Rent Reporters.
Likewise, you can get credit for certain utility payments. A free program called Experian® Boost™ lets you add mobile phone payments and utility payments to your Experian credit report.
5. Other Credit Scoring Factors
Keep in mind that it takes time to establish a good credit history. Your payment history and amount of revolving debt are two of the biggest factors making up your score—but they aren’t the only factors.
Credit scoring models also take the length of your credit history into consideration. This makes up 15% of your score. Therefore, it can take years of responsible credit use to achieve an 800 score.
Other factors include types of credit in use (10%) and new credit (10%). In which case, it helps to diversify your credit accounts. This includes having a mix of credit cards and installment loans. However, only apply for credit when necessary. This is important because new credit takes into account recent applications or inquiries.
Each inquiry (which occurs when creditors check an applicant’s credit report) can reduce credit scores by a few points.
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Banking services provided by The Bancorp Bank or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card is issued by The Bancorp Bank or Stride Bank pursuant to a license from Visa U.S.A. Inc and may be used everywhere Visa debit cards are accepted. Please see back of your Card for its issuing bank. The Chime Visa® Credit Builder Card is issued by Stride Bank pursuant to a license from Visa U.S.A. Inc. Debit card and Credit card may be used everywhere Visa debit and credit cards are accepted.
*Chime SpotMe is an optional, no fee service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account each month. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member’s Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime’s discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions. SpotMe won’t cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.
^Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.
~Out-of-network ATM withdrawal fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.
¹To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.
²Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.
