What Happens if You Have No Credit?

The first path to becoming a homeowner is having good credit. If you have not yet established your credit record – begin working on it immediately.

If you have just graduated from college – resist the long list of credit card offers from major department stores and banks. From this point on – every major transaction you do with a lending institution will be recorded and stay with you for at least 7 years or more.

To begin your credit future:

• Open a checking account  

• Open a savings account (see our Finance/Banking section for more guidance)

• Consider making a small loan against your savings account. In other words – you are borrowing from yourself using the bank as the pay in/pay out window – however in this case you will be establishing a credit rating for yourself. If you have your payments automatically drafted from your checking account – you can be sure the credit rating will be a favorable one.

Secure letters of reference – although they do not appear on your credit report, making payments on time to all of your debtors’ is very important. With no other credit it does not hurt to have references letters on file and indicates proactive responsible character.

• If you have been renting an apartment and have paid your rent on time each month – ask the Apartment Manager for a letter of credit reference and keep it with your important documents; you should also have several copies made for your files. The letter should contain the full contact information of the apartment and the management company; including first and last names, phone numbers, email addresses. The letter should state the day you moved into your apartment – your monthly rent – the due date – and the date you made your payments.

• Utilities – you can do the same for your utility providers. Generally they have a standard letter of reference on file; this would include power, gas, cable, and telephone.

Employment History – is recorded on your credit report – the longer you stay at your job, the better it looks for your dismal report.

Residence – creditors like to see stable employment and residency. It indicates you are established and pay your rent on time and avoid eviction.

When you do secure credit such as a major credit card – don’t charge more than you can afford to pay off every month – this will avoid huge finance charges.

Credit & Financial Matters