How to Stop Being Credit Invisible
Written by: Kristy Welsh
Last Updated: July 31, 2017
It’s hard to get credit if you have bad credit, but it can be equally challenging if you’ve never had credit at all. That’s what you call being credit invisible, meaning you have no credit history with any of the big three national credit bureaus. And with no history to go on, creditors consider you a risk not worth taking. Fortunately, there are several things you can do to put yourself on the credit map.
You don’t need good credit – or any credit – to get a credit card. All you need is the money to secure the credit card. It might be a couple of hundred dollars; it might be five hundred dollars. Whatever the amount you can afford to part with for a while, that’s how much your credit limit on a secured credit card will be. Just be sure to only apply for one that gets reported to the credit bureaus every month and shop around for the best deal.
After 12 to 18 months, ask the credit card issuer to upgrade you to a regular credit card account (which they may do automatically). Once you’re upgraded, you will receive your deposit back. In the meantime, treat the secured credit card just like a regular card – use it at least once a month and when the bill comes due, pay the balance in full.
2) Ask a family member or close friend to make you an authorized user on one of their credit cards
This option isn’t for everyone, but if you feel comfortable asking someone to authorize you as a user on their credit card, here’s how it works:
- A credit card holder calls their credit card issuer and asks that you be added as an authorized user on their account (the older the account, the better)
- The credit card holder receives your authorized user credit card, which they can give to you, or not (in fact, you may have a better chance of having someone add you as an authorized user if you tell them you don’t actually want to use the card; as long as they are using the card responsibility, it will help your credit)
- The credit card account appears on your credit report and is updated every month
- Once your credit is established, you can simply be removed as an authorized user
Of course, there is always the possibility that the person you ask for authorization ends up maxing out the credit card or being late with payments. This will hurt your credit, so be selective with who you ask.
3) Sign up for a rent-reporting service
If you pay your rent on time every month, you should get credit for that. But this isn’t information that is automatically reported to the credit bureaus. You’ll need to sign up for a rent-reporting service. They contact your landlord and verify your on-time payments every month. Though your landlord is not required to do so, it’s worth a try.
Once you’re signed up, your rent payment history should appear on your credit reports. They will not, however, be calculated into all of your credit scores. But as reported by NerdWallet, you can expect rent payments to be included in FICO 9, FICO XD, and VantageScore.
Note, it’s not just on-time rent payments that will be reported. If you’re late, that will be reported, too. So once you sign up for a rent-reporting service, be sure to pay on time.
4) Make timely payments on your cell phone, landline, and cable TV
If you don’t have enough credit history to generate a traditional FICO Score, you may be issued a FICO Score XD. This takes into account payment history on your cell phone, landline, and cable accounts (as well as any credit bureau data, property data, and public records that may be on file). Once you have a FICO XD, you can expect to be upgraded to a traditional FICO Score after 6 months.
5) Open an account with a bank or credit union
While bank accounts do not appear on your credit reports – or affect your credit score in anyway – they will help you build a relationship with a lender. The longer you have checking and savings accounts with a bank or credit union – accounts that you keep in good standing – the better position you’ll be in to apply for a loan through that financial institution.
6) Apply for a credit-builder loan
While a traditional loan allows you to take money from a lender and pay it back later, a credit-builder loan lets the lender put the money into a savings account that you cannot touch until the loan is paid off. Provided you don’t need the money right away, this is a win-win situation. The bank protects itself, as the money you are "borrowing" stays in an interest-bearing savings account with them. And you get your on-time monthly payments reported to the credit bureaus, plus that big chunk of money (that’s been kept in a savings) once the loan is paid off.
Ask your bank or credit union if they offer credit-builder loans. If not, search here for an institution that may be able to help. You can also try online credit-builder loans through sites like Self Lender.
Track Your Progress
Once you start building your credit, you need to track your progress. Fortunately, there are numerous ways to monitor your credit reports and scores, for free and for a fee. Of these, we recommend:
- Free credit reports every 12 months from AnnualCreditReport.com
- Free credit monitoring subscriptions from Credit.com (for Experian) and Credit Karma (for TransUnion and Equifax)
- Free FICO Score through Discover or your credit card issuer
Treat Your Credit Right
The only thing worse than no credit is bad credit, so once you have it, don’t mess it up. Avoid the pitfalls with 9 no-nonsense ways to build the best credit.