Are You One of the Credit Invisible? You Can Still Build a Credit History

People need credit reports and scores in areas of life from getting a job to buying a car or house

Credit Report / Are You One of the Credit Invisible? You Can Still Build a Credit History
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December 13, 2016

According to the Consumer Financial Protection Bureau (CFPB), one out of every ten adults in the U.S. does not have any kind of credit history with one of the three nationwide credit reporting companies—a number totaling 26 million people. Given the necessity of having such a history for completing such tasks as getting a job and getting a car or home loan, it is fortunate that there are things these people can do to build their credit.

Know the Factors That Will Affect Credit the Most

One crucial step essential for building a good credit score is to pay your bills on time, each and every time. Also, do not max out your credit limit, but instead use no more than 30 percent of the total limit. This will increase the likelihood that you will be able to make payments.

Use Products That Will Help You Build a Credit History Responsibly

Several products can be helpful in establishing or rebuilding a credit history in a responsible manner while also providing the opportunity to practice making payments on time that will then be reported to a credit reporting company. Such products include:

  • Secured credit cards. You can apply for this type of card just like a traditional credit card. After you receive approval, you deposit a certain amount of money—ranging from $50 to $300, depending on the card company—into a separate account. The bank will hold onto this deposit and give you a credit line that matches the amount of your deposit. Usually banks will report card activity to the credit reporting companies so that you will build credit by using it, but be sure to confirm this with your issuer. In addition, many secured cards also come with a "graduation" component that will enable you to move seamlessly from a secured to a traditional credit card after you establish a consistent payment pattern.
  • Credit builder loans. For this product, a financial institution—generally a credit union—will deposit a small "loan" (often an amount between $300 and $1000) into a locked savings account, and you will pay back the institution with small-dollar payments over six to 24 months. These payments are reported to credit reporting companies. When you reach the end of the loan term, you will get back the accumulated amount in total. Such loans often have two benefits: in addition to building credit, they often help you build savings, which can be used for an emergency in place of more expensive financial products or as a deposit for a secured credit card. This product can help you build a credit history if you have never had one before.
  • Retail store credit cards. Several retailers and gas stations offer credit cards, which tend to be easier to get and generally offer lower credit lines than others. The combination of these features often makes this type of card an option when consumers are trying to build a nonexistent or thin credit record.

Report Non-Traditional Payment Data to Credit Reporting Companies

Consumers make several payments that are not usually reported to credit reporting companies but that could be used to record a history of on-time payments. This kind of information may include monthly rent or cell phone payments. You can also take advantage of this opportunity to opt into self-reported payments through companies that offer such a service. However, fees and conditions sometimes apply for such services, so make sure to find out if this is the case before you enroll.

Know How to Get a Copy of Your Credit Report

You have the right to request a copy of your credit report from each of the three nationwide credit reporting companies for free one time every twelve months at Getting the information included in this report is the first and most important step to building or rebuilding credit.

Find an Error? Take Action to Fix It

If you find any kind of error on your credit report, you should actively take steps to correct it.

You have the legal right to dispute any error on report with the credit reporting company and the organization that provided the information to the credit reporting company, such as your lender. When you dispute a mistake, companies have to conduct a reasonable investigation of the dispute for no charge. If an error is found, the company that provided the incorrect information has to correct it and inform all the credit reporting companies to which it gave the incorrect information.

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