Where to start if you have no credit

What should I do if I have no credit and I want to establish credit? This question is asked so much, I thought I’d write an article rather than repeat myself. To begin with there’s a lot you need to know, and you can learn much of it by reading the articles posted in my profile. Nevertheless the quick answer is join some credit unions and get secured cards & a loan there, if necessary, also Discover and capital one are very friendly to new files. The best approach in my opinion is to get 3 bankcards and one 12-month $500 loan, all in your first month. This can be accomplished by obtaining Secured Cards and a share secured loan from a credit union (ensure loan has no prepayment penalty and payments do not advance the maturity date). Do not discuss this with the institution and do not tell them your plans, as they do not understand how credit scoring works. But as soon as the loan reports, you can pay $440 back, then make 12 - $5 dollar payments (The last payment will be a little bit more including the interest). This will allow you to minimize interest and still make 12 payments. Once you get the three cards and loan, freeze all three credit reports. Use the cards responsibly and pay in full monthly. After 6 months, you will have a nice fico credit score. But, do not use it, did not give into temptation. At 10 or 11 months, start practicing AZEO (read my AWB Primer). Wait until 12 months, to the day, of the last application. (So if your last application was submitted February 13, wait until February 13 of the next year.) You will see a nice increase on the first of the month of the one year anniversary (February 1 in this example), but you will also see points return from the inquiries on their anniversary. At that point, you can get 2 to 3 more bankcards and you will have an even nicer score. (With a year of history and a nice score, you should be able to get nice cards from almost any lender.) The following month you can expect quite a Score drop. This comes from two different things, the loan closing causes you to lose the bonus points for having loan utilization low, and the new bankcards cause Scorecard reassignment. Do not stress and do not worry. Your score was artificially inflated by the low loan Utilization for this purpose among others. Plus, the score will recover nicely with time. Freeze your reports again and wait at least a year before more activity. At that point (2-year old file), you will have real nice scores again (AZEO), as long as you made all your payments on time and have your utilization low. Whether or not you need more cards at this point is really a matter of preference. While it could offer more points, it’s not necessary. A couple notes, if your plan is to get a mortgage, your mortgage scores are totally different and you would want to apply right before the file becomes two years old or better yet, after it’s three years old. Don’t use 6 month cycles as a lot of people recommend, it’s just keeping you from reaching higher scores. Also avoid store cards unless they really make economic sense for you because they increase insurance premiums in all but 5 states. This article is meant to tell you what to do, not to really explain why. If you’d like to know why, read my other articles. Would love to hear feedback. However if you have questions, read my other articles first. They will probably answer your questions and if not, it will give you the understanding necessary for me to explain whatever you need. © 2022, MFBirdman7. All rights reserved by Birdman CreditRebels.