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Having no credit history is the biggest problem in acquiring a new credit card or any type of loan. Even though you don`t have any credit history and not many companies are interested in offering credit, credit history can be established. In converting a zero credit history to an established credit history, lending institutions examine several factors to determine the capacity of the lender. Following factors are examined by lenders for establishing the credit history for providing the loan or credit card for the first time.
Transactions of bank account:
Credit history or non-credit score is not required to open a bank account. Transactions with the bank pay a vital role in determining the capacity of the borrower by credit bureaus. Maintaining the bank account in a proper standard proves that the borrower can manage money in proper way.
Employment history:
The major factor influences the credit score is the details of present and past employment. The lenders look into the factors that how long the proposed borrower hold a job, employment status, unemployment period if any, etc. A steady job with good records increase the chances of availing the good credit score. Apart from bank account, establishment of relationship with the bank will increase the chance of obtaining credit card or loan. The existing good relationships with bankers enhance the credit score.
History of residence:
Residing locality, rented or own premises, frequency of shifting the residence, etc are examined. Additional scoring will be added for the residence offered by stable employment or event for a joint possession of property along with the spouse.
Utilities in the name of borrower:
Many utilities can be registered in the name of borrower even with zero or no credit history. The utility may include electricity connection, gas connection, telephone, cable, water service, etc.; having a registration with these accounts can help the first time borrowers.
It is not encouraged to obtain a departmental store cards on regular purchase. But it may still be helpful to establish credit for the first time. However, the card needs to be used in a proper manner.
When all the above failed in establishing a credit history or conversion of no credit history, secured credit is the final resort.
A credit card or loan can be availed with collateral security or guarantee attaching an asset to the account. A secured credit can be availed in an easier way than a non-secured loan. When the borrower fails to make payments, the asset attached to the loan or card will be liquidated to cover the payment. However, a good payment history with a secured loan or credit helps in establishing credit history or enhancing the credit score of the borrower.
Above all, it has to be ensured by the borrower that the credit history is reported to credit bureaus to avail further loans or credit cards. Establishment of credit history or conversion of no credit history is just the first step and it takes a reasonable time to attain good credit history.
