Insufficient credit history is a situation in which someone’s credit history doesn’t provide enough information for them to qualify for anything more than a high-interest credit card. Credit scores count on-time debt payments and other factors to determine your financial responsibility, so if you don’t have a credit score yet, there are ways you can start building it up today.
How to deal with Insufficient credit history
1. Start with secured credit cards
This is the best way to get a credit card if you don’t have a credit history. Secured cards require you to put down a deposit, anywhere from $200 to $1,000. The higher deposit required, the higher your credit limit can be. After six months of on-time payments on the card, you will then be able to apply for an unsecured card with your improved credit score
2. Apply for a store or department store card
If you have some regular spending with certain stores, applying for a store or department store card is a good way to start building credit history.
The first step is to be sure that you are eligible for a card in the store of your choice. Then, make sure you have an updated photo ID and check your personal information on all accounts to make sure it is accurate. Once approved, you can use the card regularly to make purchases at that particular store or department store. After six months, this type of credit card will allow you to apply for an unsecured credit card with a credit score above 620 and a clean financial history.
3. Get the best student loan repayment plans available
If you are in school or recently graduated with student loans, there are several payment plans available that can help boost your credit history without affecting your monthly payment amount.
Many lenders will allow you to increase your credit limit if you pay on time, which means that you can use your higher limit for more expensive purchases. Other options include making five equal payments toward your student loan. If you have one loan with a balance of $5,000 and make five equal payments of $500 each month, this will be repaid in just over one year.
There are many other payment plans offered by different lenders offering interest rates that start as low as 2% and can go up to 8% depending on the type of repayment plan you choose. Do your research and find a loan that best fits your needs to improve your credit history without affecting your monthly payment amount.
