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Overcoming a Limited Credit History

When you are ready to establish credit, you are faced with the great credit paradox: in order to get credit, you must have credit.

Although this is a slight over-simplification, it is based in truth. Your credit score is based on your credit report and overall credit history. In this case, a clean slate is not necessarily a good thing.

Without sufficient credit history, lenders may not know if you are a credit risk. This can make it difficult for you to secure credit cards, open new lines of credit, or get better interest rates.

So how can you get credit with limited credit history or no viable credit scores? It is possible.

Why building credit history is unavoidable

Although it is possible to live your life without incurring any debt, the likelihood of this is slim. Even without credit cards, you may need financing for:

  • Automobile
  • Home mortgage
  • Student loans

Also, you may need an established credit history for other reasons. According to a source, in addition to applications for credit, your credit information may be checked when you are trying to:

  • Get a new job
  • Apply for insurance
  • Lease an apartment

Simple ways to establish your credit history

It may seem as though it is difficult to establish a credit history. Trying the following options may help:

  • Apply for a credit card through the bank where you have your checking account. This is not referring to a debit card, which does not establish credit history.
  • Apply for a store credit card, which typically has more lenient applicant requirements than one of the major credit cards. Store cards could be an excellent first step in establishing your credit history and associated credit scores.
  • Financing a store purchase with a same-as-cash offer. Again, a viable first step in establishing your initial credit history.

Additional help from Experian

The credit bureau Experian has created another avenue for consumers with limited credit history. According to a press release from the company, Experian created the Extended View score. This score includes three unique data sources:

  • Experian's credit data
  • Rental information
  • Public record data

According to Steven Wagner, president, Experian Consumer Information Services, "Many of the estimated 64 million consumers with limited to no credit history that are unscoreable by traditional credit scores are creditworthy. Extended View can redefine how businesses evaluate this underserved population and empower more consumers with cost-effective credit and financial opportunities."

Begin building your credit

Everyone with an established credit history had to start from scratch at one time. As you can see, it is possible to begin to build your credit history right now. Regularly checking your credit reports and associated scores based on data from the 3 major US credit bureaus (Experian, TransUnion and Equifax) will help you track, monitor and understand your credit history and patterns.