No credit history means that when credit bureaus like Experian try to pull out your history of past transactions, nothing turns up. This could be because you haven’t taken any credit cards in the past or insurance or loans. Therefore there is no financial transactions’ history that your creditors can find, when trying to take a decision on whether to lend you money or not. Here are some of the things that you can do in such a situation.
Continue with no credit history
You can make all your transactions in cash without really worrying about credit history. The issue with that is you wouldn’t be able to get loans from banks or credit cards, if you ever need them. Even auto insurance premiums depend on your credit history. In recent times, prospective employers too have started referring to the candidates’ credit history. So, it is ideal to take steps to build your credit history.
Go for prepaid credit cards
Prepaid credit cards
can be used for online transactions as well as for payments in stores and restaurants, the same way as you use normal credit cards. The big difference though is that you buy prepaid cards by paying in advance. A part of what you have paid goes down as service charges and your available credit will be a percentage of what you have paid. If the fees and charges aren’t very high, prepaid cards are a good option especially for those who don’t want to spend beyond a certain limit, without their knowledge.
Secured credit cards
You can go for secured credit cards
when you have some money to deposit in your account as security deposit. You can get secured credit cards at decent interest rates even without any credit history when you have a deposit in your bank account. You need to pay the bills on time. Otherwise, the creditor can claim the deposit from your account.
No credit, credit cards
Also known as no credit check, instant approval credit cards, these are cards offered by lenders who play the high risk game. In other words, the lenders take a chance with customers who have no credit history. In return they charge exorbitant interest rates and a whole lot of other fees as well. This is one of the few ways one can build their credit history, if all other avenues are closed. However, the main threat is that due to the fees and interest rates, your debt could grow exponentially unless you are careful about making payments on time.
This is what works in case of student credit cards. When you have no credit history, you can get a friend or family member with good credit history to co-sign the credit card for you. They are vouching for you in a way and would be responsible for the debt if you don’t pay the bills on time. Moreover the credit history on such cards will also reflect usually on the credit history of the co-signors.