1. Zero credit history with zero debt in your name is considered risky by lenders. They have no information to reference; no proof of timely payments being made or history of loans repaid. The first step to credit is establishing a credit bill paying history when you don’t need a loan.
2. You can start to build your credit with a secured credit card. A secured credit card is when you put money into a bank account and are provided with a secured credit card with a charging limit matching the money deposited. You use the secured credit card to make small charges, then pay the amount off in full every month.
When I was broke, just out of college, with only student loan debt to my name, I went to a Wells Fargo bank to open up a checking account for my new job. I then inquired about credit cards and was informed about getting a secured credit card. I provided a $350 deposit to start and was on my way with my first credit card for credit building.
3. There are 3 Credit Agencies- Experian, TransUnion and Equifax. You need to check your credit reports separately from each reporting agency. You are able to request a free credit report each year. https://www.annualcreditreport.com/
There are mistakes on credit reports and they can be refuted with documentation. Reports can also help show if you have been a victim of identity theft.
4. One late payment can seriously lower your credit score, even after years of timely reliable payments. Vendors do not care. Late is late.
Do not trust payments being received from sending in the mail. Do not use calendar reminders or to do lists for regularly monthly bills. Set up automated credit card payments (even for minimum amounts) to ensure you are never late.
When you move, contact all your vendors to update your address on file; do not rely on the mail change form with the postal service to forward all your mail. A late payment can stay on your credit report for 7 years.
5. Credit cards are a great tool for building credit, not spending money. I used to believe having lots of credit cards would lower my credit score. This was wrong. Having lots of credit cards that are maxed out, not paid off in full each month or paid late is what damages your credit score. Open up credit cards with the purpose of paying off balances each month. Use to build your credit score by showing you can make your payments on time and not use the max credit limit on each card.
Credit cards are not to be used for spending money you don’t have. They are for emergencies or building your credit. Furniture, food going out, travel, are not emergencies; an unexpected medical or legal bill is an emergency. Note- Many vendors will also allow for payment plans to be set up vs. one lump sum payment, which helps spread out your charges overtime without incurring any late fees.