7 Ways to Establish Credit For the First Time

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how to establish credit

Wondering how to establish credit? There are a couple of reasons why you may not have any credit history. Perhaps you’re a young adult who’s never had a credit card or loan before. Maybe you’ve had credit in the past, but your accounts have been closed and there’s no recent information. 

It’s possible you have credit, but your score is just really low. Whatever the reason – the good news is that there are many ways to establish credit and boost your score. 

From secured cards to credit builder loans and everything in between – we’ll show you how to establish credit – without a credit card

Credit building methods for beginners

It’s true that using a credit card responsibly can help you improve your credit score. However, you might find it difficult to even qualify for a credit card if you don’t already have established credit. These tools can help you get your score to where it needs to be. 

Credit Builder Loan

A Credit Builder Loan from MoneyLion is a safe, trusted way to establish credit and improve your score. Applying requires no hard pull – so you could get approved even if you have no credit history!

For $19.99/month, you can access up to $1,000 and same-day funding – all at an affordable interest rate. Your membership also comes with credit tracking tools and weekly updates to make sure you have everything you need to monitor your score. 

MoneyLion reports all Credit Builder Loan payments to the three main credit bureaus – Experian, TransUnion, and Equifax. Just keep making your payments on-time, and your score will go up! MoneyLion’s credit building app really helps.

Installment Loan 

Installment loans require borrowers to make equal payments over a set period of time. Mortgages and car loans are common types of installment loans. You could qualify for a car loan or another type of installment loan without credit if you have a willing co-signer available. 

Your payments on installment loans are reported to credit bureaus. So as long as you are making consistent, timely payments, your credit score will grow over the course of the loan. 

Secured Loan

A secured loan is another option for building credit. This type of financing requires you to put up a valuable asset you own as collateral in exchange for the loan. This could be your cash savings, investments, car, or a home – essentially anything you own that’s of value. 

While a secured loan is one solution for how to establish credit – it does come with some risks. If you are unable to meet your payments, you could potentially lose the asset you’ve given up as collateral. 

Secure Card 

Not to be confused with a credit card – a secured credit card requires you to put up a cash deposit equal to the maximum limit. These cards are ideal for someone with little to no credit history and can be a very effective way to build credit – especially for young adults just starting out. 

Just make sure to make your payments on time, as these cards typically accumulate high-interest rates. 

Report Rent and Utility Payments

Did you know that rent and other utility payments go on your credit report? You can include these payments on your credit report through your landlord or platforms like Experian Boost and Rent Track. 

Rent Track and Experian Boost automatically scan your linked bank accounts for rent, utilities, and other qualifying bills to help you build a positive payment history. If you’ve been paying your bills on time, you could get an instant boost!

Student Loans

Student loans are one of the most popular types of ways for young adults to build credit. Federal student loans also typically have lower interest rates than private loans or credit cards. 

Even if you’re enrolled in college, we recommend getting a head start on your student loan payments as soon as possible. There are plenty of ways to earn extra cash while you’re still in school. Doing so will allow you to start paying off your debt faster. You’ll also benefit by accruing less interest.

Become an Authorized User

Many young adults can establish credit by becoming an authorized user on someone else’s credit card – usually a parent or another trusted family member. People looking to rebuild their credit scores could also benefit from this option. 

If you’re an authorized user on someone else’s credit card, your credit score will be affected by their payments. If the person who has you on their card is responsible and makes their payments on time – your score will improve. However, you could be negatively affected if they’re forgetful or spend more than they can afford – be wary of who you choose and trust!

Monitoring your credit once

Although not typically a way to establish credit, monitoring your credit score is just as important. If you have bad credit, make sure to get a hold of your report and uncover what’s hurting your score. It’s possible there’s been an error that you could dispute. 

As your credit continues to improve over time, you want to be in the know about what’s helping it improve but also on the lookout for possible errors. MoneyLion offers top credit monitoring tools. 

Need Cash Without a Credit Check?

MoneyLion also offers 0% APR cash advances with Instacash. You can get up to $250 straight to your phone whenever and wherever. And there’s never a credit check. You’ll be able to pay back what you’ve received, and only what you’ve received when your next paycheck comes in.

MoneyLion is the complete package when it comes to smart banking. Learn more about how our banking products are revolutionizing personal finance and changing the way Americans access banking tools!

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Join Credit Builder Plus to get a loan up to $1,000, credit monitoring, exclusive rewards, access to 0% APR cash advances, and more. Over half of members raise their credit over 27 points within 60 days!

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