For those people who are dealing with a sub-par or super-low credit score, there is an abundance of good advice available regarding how to improve a poor credit rating. From debt negotiation to loan refinancing, New Jersey
credit repair attorneys are able to help their struggling clients watch their scores go up, up, up!
Obviously, on the other end of the spectrum are those people who've (almost) always made sound financial decisions, haven't experienced any major catastrophes, and therefore have great credit scores with glowing credit reports. They obviously don't need help in this arena.
There's a much less talked about gray area of the credit spectrum, though, where some young people are finding themselves stuck. These people are generally either in their late teens to early 20s, or they've been living at home with their parents and may be approaching their mid-20s or even 30.
What does it mean to have "NO credit history"?
While the terms "bad credit and zero credit history" can often be confused, the two situations are entirely different and it's important to know your options if you're in the zero credit history category.
A bad (or low) credit score suggests that you have made some significant missteps in your financial history. This means you
may have: had a number of late payments on any of your expenses, racked up too much credit card debt, co-signed a loan that defaulted, defaulted on a loan of your own, recently applied for a number of new loans, closed credit accounts that you don't use (which lowers your
credit utilization ratio), had your home foreclosed, or
filed for NJ bankruptcy.
As someone with zero credit history, you'll face similar problems as those with low credit scores when it comes to getting a loan, credit card, buying a car, purchasing a home, and sometimes even renting an apartment.
Having no credit history, however, is generally much easier to "fix" than having a bad credit history. That's because you haven't necessarily made any
bad money choices - you just haven't appeared on the credit system's radar yet. You don't have any credit cards, you've never applied for a loan or financed a vehicle. When performing a search for your credit history, lenders will simply come back with....nothing. Zero. Zilch.
Does zero credit history mean my score starts at 300?
Just because you have no credit history doesn't mean you have to start at the bottom of the credit rating scale, which ranges from 300 - 850. Your credit worthiness will be given a score, but not until you have engaged in some activities that can be "rated."
It can be frustrating when you have no credit history because, although you don't have a bad credit score, creditors still can't tell much about your credit worthiness. They don't know if they can trust you to pay back money or not. Because of this, getting your credit history rolling can be tricky.
Naturally,
everyone had to start with no credit history, so building a good credit score from your vantage point is definitely doable. Because lenders will be wary of you at first, you'll need to start with baby steps.
What kind of credit will I be able to get?
Although you won't be able to apply for a high limit credit card or a home mortgage right off the bat, there are low-risk ways for you to build a credit history. Start by asking your bank if you can apply for their
secured credit card. If you've been banking with them for awhile, they'll be more likely to approve you since they at least know your banking habits. For those who've never had a bank account, your first step will be opening a checking account. Do some research first so that you're sure to open an account with a bank that offers a secured credit card.
It may be possible for you to receive a slightly larger loan, like a used car loan, but you may have to ask a parent or close friend (with good credit) to
cosign the loan with you. Most importantly, no matter what your first loan is, you must be sure to make your monthly payments on time. Eventually your responsibility will pay off and your credit score will rise.
At first, your score will not start at the bottom (300) of the scale, nor will it
skyrocket to the top (850) simply because you make a few timely payments. However, as soon as you are granted a loan and begin making payments, your credit history will no longer be a giant blank space. Your score is likely to start off somewhere in the middle of the range, and will only continue to rise as you demonstrate credit worthiness.