First Time Credit – 4 Unique Ways To Get Approved
Did you know that the average age of first time credit applicants is 18. Credit lenders widely consider applicants’ credit history to decide on loan approvals. Then, how does a first time credit applicant with no credit history get approved for a loan application? The first timer credit applicants have to go the extra mile, as they don’t have existing proof to convince their creditor.
What Is First Time Credit?
If you are a first time credit applicant, it means you have never had any type of credit in the past. If you don’t have a credit account, you probably do not have a credit history, so there isn’t any possibility of a credit score.
The loan approval process of first time credit holders is not the same as that of others because, in that case, loan lenders don’t have references to confirm your creditworthiness. This doesn’t mean you can’t have one. It is just that you have to put more effort into establishing credit before starting your credit journey.
Why Does Credit Score Matter?
A credit score is a three-digit number representing a user’s creditworthiness. Major credit bureaus, like Experian, Equifax, and TransUnion furnish a credit report for each individual. Based on the data of this report, lenders check how risky it is to approve the credit requests of the applicants.
The credit scores that vary from 300 to 900 are estimated by considering the previous payment history of the users. But, this is not applicable to first time credit holders who have never owned a credit account.
Reasons for Not Having a Credit Score
When you are new to this credit stuff, it is normal not to have a credit score. Here are some of the reasons and scenarios that might leave you with no credit score.
If you are a young adult, you might not have been in a position to handle finances alone. So, your parents would have backed you to others to fulfil your financial needs. This may be a very common reason for an individual not to have a credit history until they are exposed to the credit needs of the world.
Never Had One Before
This category of people is quite uncommon, but they do exist. Though being an adult, they have not opened credit like an unsecured credit card, traditional credit card, mortgage loan, and any other form of credit. This may be because they have not faced the need to apply for credit.
Not Active for Two Years
Though you make timely payments on your dues, if your credit account was idle for more than two years, this might affect your credit score. FICO’s recent credit scoring models, like FICO 10T, are more concerned about recent credit history.
You might have an excellent credit score back in your country. Still, if you moved to the U.S. in recent times, you must restart and build your credit.
Low Credit and No Credit
There are enough misconceptions about these two terms. People generally mistake these terms and use them in a different context. Let us have a clear view of this.
Both low credit and no credit have one thing in common. If you belong to any of these categories, you might not easily get approved for credit at desired interest rates because the state is not convincing enough for a creditor to trust their applicant’s creditworthiness.
But they also differ from each other.
Bad credit can say that you failed to manage your credit payments on time. This somehow shows your inability to maintain your credit. If you fall into a bad credit category, you may not easily get approved for a loan.
But, if you are a no-credit holder, you still have the option to build your credit and prove to your creditors your worthiness.
Other Options for First Time Credit Applicants
After understanding the effects of having no credit score, it is also necessary for first time credit applicants to learn how to build their credit. If you are in a hurry to get a credit card or another form of credit, you can consider the loan options, which will not consider your credit score.
Secured Credit Cards
Credits like secured credit cards, secured personal loans, and a few more will only expect a collateral amount or property to ensure repayment. In this case, the focus on your credit score will be less, so you can easily get approved for a loan.
Bad Credit Loan Vendor
There is nothing impossible in this world. You can still search for credit card issuers or loan vendors who provide loans for first time credit borrower. You can also negotiate with the banks to get it done. But, you may be put in a situation to pay high interest in return.
Get a Co-Signer
Another simple option is to get help from a co-signer. When you have a supportive person with good credit, you can rely on them to sign your credit documents. Creditors will approve loans by considering the co-signers worthiness to repay the loans.
How To Get Approved For a First Time Credit?
If you can’t wait to build your credit, you can always try other loan options that do not consider your credit scores. Still, building credit on your own can support you with all your credit activities in the future as well.
Here are some initial steps to help you build your credit from scratch.
Enroll to Vote
Enrolling in the electoral forum is the starting point of building credit. Though it is not directly connected to your credit, it might give you an adult identity, and make you even more responsible.
Maintain a Bill in Your Name.
Maintaining phone bills, or other bills can be of help to prove your financial responsibility. Paying those bills on time can showcase how regularly you handle financial stuff.
Get a Credit Builder Loan
The best option is to get a credit builder loan. This loan is specially meant to build your credit when you are a first time credit applicant. After opening this account, you are expected to pay your dues on time for a certain period of time. Only then can your amount be available for usage.
Listen to Credit Advisors
You can rely on a trustworthy and reputed credit agency that can guide you through your credit journey. TheCreditPros is a reliable company whose experts have guided their clients for decades.
Frequently Asked Questions
1. Is no credit and bad credit the same?
No. Bad credit usually indicates that the user missed maintaining their credit scores and failed to pay their dues on time. In this state, it is hard to get approved for credit. At the same time, no credit refers to the state of not having any credit history at all. Though getting approved for a loan is hard, it is not impossible.
2. How long will a first time credit applicant takes to build a credit score?
On average, it takes 6 months to build your credit. But, if you expect a good or excellent credit score, you might have to wait a few more months.
3. How to get a loan with no credit history?
You should wait for a certain period of time and make attempts to prove your creditworthiness. Opening a bank account and maintaining a credit builder loan can build your credit. You can apply for a credit card, expecting credit card issuers to approve it with low-interest rates.
This article discussed the steps a first time credit applicant should undergo. If you need to apply for credit for the first time, make sure that you are ready to build your credit in the first place. Making yourself eligible for getting credit is far better than setting up other bad credit loan options.
You can start becoming a responsible person to handle finances on your own. Opening a bank account, and paying bills on time can help you build your credit. The best option is to open a credit-builder account, and establish a credit. If you are not confident enough to apply for credit, you can get support from credit advisors, like TheCreditPros. To learn more about our service, you can contact us here – (855) 228-8913.
Do you have other ideas, drop your suggestions in the comments section!