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304 North Cardinal St.
Dorchester Center, MA 02124
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It can be frustrating to try to borrow money if you have no credit history. However, several borrowing options, such as a secured credit card or a credit-builder loan, are available. If you have no credit, you still may be able to borrow money, but it might not be for the amount you want or need.
Credit options are available that could work for someone who has no credit; here are four of them:
A secured credit card is similar to a traditional, unsecured credit card. Unlike a traditional card, however, a secured credit requires you to make a refundable security deposit that typically will equal your credit limit. So, if you put down a $250 deposit, your credit limit might be $250. Make sure the credit card issuer you choose reports your payment activity to one or more of the three major credit bureaus (Experian, TransUnion, and Equifax) to help build your credit.
A credit-builder loan enables you to “borrow” a small amount of money that gets deposited into a locked-off savings account or certificate of deposit (CD). Once you make all the loan payments, with interest, the lender releases the money to you. Make sure your lender reports payments to all three credit bureaus (not all do) to help you establish and build a credit history. Credit-builder loans are typically issued in sums of $1,000 or less.
A store credit card is much like a traditional credit card, but they’re not quite the same. Two types of store credit cards are available—closed loop and open loop. A closed-loop card limits the use of the card to a certain retailer, and sometimes its other brands and partners. Meanwhile, an open-loop card lets you make purchases at a certain retailer as well as places where the card’s payment network (generally American Express, Mastercard, or Visa) is accepted. It’s generally easier to qualify for a store credit card than a traditional card. But store cards may come with higher interest rates, making it more expensive to borrow money.
Recruiting a cosigner for a credit card or becoming an authorized user on someone else’s card may help you gain access to credit even if you don’t have a credit history. A cosigner is someone, such as a relative, who agrees to take responsibility for debts accumulated on a card that’s used primarily by someone who might have been unable to qualify for the card on their own. The cosigner shares the debt responsibility with the cardholder. Credit issuers that allow cosigners are becoming more rare, however. An authorized user, on the other hand, is a secondary account holder who can make purchases with the card and might even have their own card and account number. The authorized user is not held liable for making monthly payments—that responsibility rests with the primary account holder. Both of these arrangements—cosigner and authorized user—can help you build credit if you have no credit history. That’s because positive payment activity on the account typically shows up on your credit reports.
How much money you can borrow if you don’t have a credit history depends on the type of credit. Here are three credit-limit scenarios:
Aside from applying for and establishing credit, here are six tips for building credit:
Building credit takes time and patience. But it can be done. At the start, you might not qualify for credit limits as high as you’d like. Yet by sticking to good credit-building practices, credit card issuers and other lenders may reward you with higher credit limits.
For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.
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