How to build credit from ZERO when you're 24?
December 8, 2009 12:50 PM   Subscribe

I'm 24 and have (apparently) no credit history. Nothing on it. Nada. I'm trying to get some kind of credit to start building up some credit history, but I keep getting turned down for cards. How can I build credit when it seems like nothing I do is being reported to credit bureaus?

I've been trying to get a credit card lately, just for emergencies and also to start building up some kind of credit history. My bank turned me down, even though I have a job, a lease, and a balance with them of over $7000. Discover turned me down. A couple of store cards have turned me down as well, all due to "Limited Credit History."

Thing is, I've been working and paying bills of one kind or another for years. I graduated from college without ever taking out a loan and my father was always very anti-credit-card, so I never even thought about taking out a student card.

I looked up my credit report, and it lists zero possibly negative items and zero accounts in good standing. It also lists a very old address. I've talked to Experian about updating the address, which looks like it's a rather complicated process. What else can I do?!

(Extra info: I live with three roommates in NYC. My name is on the lease, and I pay the cable bill, but my name is not on the electric or gas bill, and I'm still freeloading on my father's family plan for phone service.)
posted by raygan to Work & Money (43 answers total) 16 users marked this as a favorite
The usual suggestion is to get a secured credit card where you give them $500 to get a card with a $500 limit (for example) and use that to establish a credit history.
posted by GuyZero at 12:53 PM on December 8, 2009 [1 favorite]

Start small. The first thing I did to generate some credit history was go to my bank and take out a small loan for a couch I wanted to buy. I had the cash for the couch, and the bank knew that, so it was a no-brainer for them to offer the loan to me.
posted by crickets at 12:53 PM on December 8, 2009 [1 favorite]

You can get a secured credit card by putting down the full balance on the card. After a period of good payment history, you can apply to upgrade to a "real" credit card. This is how you can build a credit history.

Sometimes this is looked at in a negative light - usually after a history of bad credit, a secured credit card is the only option for a person with poor credit. But it doesn't appear that this will apply to you given your situation.
posted by greekphilosophy at 12:53 PM on December 8, 2009

Do you have a cell phone?
Start with a prepaid card for a year.

I am surprised about your problems. I was an immigrant and got my CC after a year.
posted by yoyo_nyc at 12:56 PM on December 8, 2009

My bank turned me down, even though I have a job, a lease, and a balance with them of over $7000.

Did you actually go into your bank or just send in an application? If you did the latter, go into a branch office and ask to speak to a "financial services rep" (not the tellers but the people who have cubicles) or whatever they're called and ask them Dude, WTF? what happened. Explain your situation and ask if they can help you out with a loan, credit card, or whatever.
posted by nooneyouknow at 12:59 PM on December 8, 2009 [1 favorite]

I got a gas card first, I think it was Mobil. I picked them because, back in the day, they sponsored Mystery on PBS. But I paid that balance every month, I still do. And taking a loan out from your bank for something will do it too.
posted by chocolatetiara at 1:00 PM on December 8, 2009

I did it with a secured card from my bank, as others have suggest, and then moved up to department store credit cards (Sears, Macy's), and then from there onto the shadier "real" cards (Providian), and finally on to a car loan and normal credit cards.
posted by skintension at 1:03 PM on December 8, 2009

Utility payments show up on your credit report. Do you have any utilities in your name?
posted by zippy at 1:03 PM on December 8, 2009

Utility payments show up on your credit report. Do you have any utilities in your name?

Sorry, I didn't read your question fully. You could offer to switch the electric/gas/phone to your name and pay it off. Of course, if your roommates split or run up a huge phone bill, you'd be responsible.
posted by zippy at 1:05 PM on December 8, 2009

Utility bills don't show up on your credit report unless you stop paying them and they go to collections.

Don't get a secured card, those things are ripoffs.
posted by delmoi at 1:16 PM on December 8, 2009

Response by poster: Thanks for the suggestions!

@yoyo_nyc: I have a phone but I'm still on my dad's family plan to save money, so it's not on my credit report.

@nooneyouknow: The first time I applied through my bank I did go in person to a branch, but I didn't know to ask for a secured card. I'll try that next.
posted by raygan at 1:18 PM on December 8, 2009

Response by poster: @delmoi: What would you suggest instead?
posted by raygan at 1:19 PM on December 8, 2009

Secured cards are kind of a ripoff, but it might be your only choice at this point. A lot of banks/credit cards have gotten really strict in the past year, and it’s become nearly impossible to get a credit history any other way. Just pay off the entire balance every month.
posted by dinty_moore at 1:23 PM on December 8, 2009 [1 favorite]

Maybe try a larger, national bank if that's not what you are currently with?
posted by Juicy Avenger at 1:26 PM on December 8, 2009

Response by poster: @Juicy Avenger: I'm with Chase, and up to now I've been pretty happy with them as a bank. If this goes on much longer though I'll try Bank of America or Capital One or something.
posted by raygan at 1:30 PM on December 8, 2009

1. Run, do not walk, to your bank and take out a small loan. While applying, see if they will approve without pulling credit, i.e. they just use your account file and Chexsystems rip, and possibly by examining a credit report copy that you bring in.

2. Check the link below (#4) to find an unsecured credit card who might approve you. I imagine this will be hard as I don't know who approves on a near-empty credit history, but if you dig around you may luck out. The bottom line is not all credit card applications are processed equally and you should always, always, always research first before letting some snooty credit card company piss in your file with an unnecessary credit pull -- and that's even if you have a good FICO score.

3. I disagree somewhat about secured credit cards... get one if you have no recourse, but be wary of punitive terms or high application fees, make sure it reports to the bureaus, and pay it off monthly. With no credit you may have to suck it up and get a dog of a card, but the sad fact is that creditors gleefully take advantage of disadvantaged. I see secured cards as sometimes being a calculated loss to get more favorable terms and better positioning for mortgages, etc, later on.

4. Go to and dig around in their forum... establishing credit is a very common topic there. The bankruptcy forum has a section that lists "bankruptcy friendly creditors" which if you read between the lines are creditors who are less averse to risk and are more appropriate to apply to.
posted by crapmatic at 1:32 PM on December 8, 2009

Also when I recommended trying to get a loan with your bank, the approval/underwriting for a credit card is often different from small loans, so that's why I was suggesting a small loan. It didn't sound like you tried for a small loan, just a card. If I'm mistaken about that someone is welcome to correct me.
posted by crapmatic at 1:34 PM on December 8, 2009

One of the easiest ways to build credit history is to take out an auto loan. Auto loans are a better risk for banks because they can just take back the vehicle if you stop payments. They can't get the money back if you stop paying your credit card debts. When you pay off the auto loan (assuming you never miss any payments) your credit is GOLD! Instead of you applying for credit cards, credit card companies will be soliciting you. Endlessly. Of course you have to decide how much a good credit rating means to you because car loans are expensive. Hell, having a good credit rating is expensive because your score mostly depends on how much credit you use and later pay back. This does not mean charging something and then paying it off at the end of the month. You don't get anything for that and neither do the banks. You need to have money out on a card for months to establish yourself as a good credit risk, pretty much long enough for the credit card companies to make money off you.

Try a credit union before you go to any of the big banks. The credit unions don't seem as evil. And if you do get an auto loan make sure and ask if you can refinance it after a year, because you'll probably start with a ridiculously high interest rate until you can prove you are credit worthy. After a year you can knock a bunch of interest off your loan if you refinance. Just remember to always make the minimum payment on time every month and pay extra if you can on the principle. And if you ever get into trouble (loss of lob, illness) call the bank first. Ceasing communication with the bank is one of the best ways to destroy your credit rating.
posted by wherever, whatever at 1:40 PM on December 8, 2009 [1 favorite]

Try a credit union. They tend to have a more personalized approach to clients. Your employer might have one. If you graduated from college you could also check with your alumni association – they usually push credit cards on grads that give them a cut with every purchase you make. Also, you don’t seem entirely certain that you don’t have a credit history – please (try to) get your credit report just in case.
posted by Dotty at 1:41 PM on December 8, 2009

Maybe try a larger, national bank if that's not what you are currently with?

Actually, try looking for a credit union. I was turned down for the same reasons this summer with a bank I have been with since elementary school, but was accepted through a credit union I am also a member of. However, I did have a previous car loan through the credit union, and I'm not sure if that affected their decision.
posted by ArgentCorvid at 1:47 PM on December 8, 2009

Do you have anybody who can cosign? If you have a family member with good credit, you may be able to jump start your credit off of theirs.
posted by willnot at 1:52 PM on December 8, 2009

when I had crap credit I got a secured capital one card, which had a $59/year fee in addition to the positive balance I had to maintain. I got a cellphone with that card, and because they didn't love my credit, I had to put a $200 deposit and preauthorize the credit card or my bank account to pay my phone bill.

those two actions did a lot to build my credit. after a year of perfect payments on the secured card I was able to get an unsecured card with no fee. I was also able to recover the deposit and open my next cellphone contract with normal cycled billing, instead of having to preauthorize.
posted by toodleydoodley at 2:07 PM on December 8, 2009

Try applying for a department store card (Mervyn's, Kohls, etc). When I was young and had no credit, Montgomery Ward gave me a credit card with a $500 limit. After I used it a few times and paid it off in full each time, I was able to get a VISA card.
posted by Oriole Adams at 2:16 PM on December 8, 2009

Response by poster: This all feels like such a Catch 22.

So I went down to my bank this afternoon and applied again for a credit card. I'm pretty sure I won't get it. As it turns out, Chase doesn't even OFFER secured cards anymore, so if I want one I'm going to have to go to another bank. I'd love to hear if anyone's had a positive experience with one lately at a bank where you weren't previously an accountholder.

I think my next step is going to be taking out a small loan from my bank, as Crapmatic suggests.

Unfortunately, I live in New York and have no reason or ability to take out an auto loan.

To Dotty: I'm entirely certain that I don't have a credit history. Experian came up with a basically empty report, and the other two agencies I tried came back with no record of me at all. It's like one of those cool, hacker, "off the grid" things, only way more inconvenient and unintentional.
posted by raygan at 3:07 PM on December 8, 2009

Response by poster: I always thought that the fact that I was able to get through school with no debt and even some savings was a GOOD thing. Now it's as if I did something WRONG by paying my bills on time and not borrowing unnecessarily. What the hell is wrong with this picture?!
(OK, rant over; thanks for letting me vent and thanks for the suggestions.)
posted by raygan at 3:12 PM on December 8, 2009

I hate banks. See if you can join a credit union. If you work with a large company, the federal or local government, are in a union, you probably have one you can join. Your alumni association may have a partnership with some credit union as well. If your parents or grandparents belong to a credit union, they maybe able to offer you membership.

Most credit unions have a program geared for "young adults". I got a credit card at age 18. It started out at $500, and grew every year. Now I have a regular card with $2k. I pay it off every month. My credit isn't great, but it is existent.

Only downside is that credit unions don't often own lots of ATMs. Most will have a program to pay back ATM fees (like 3 per month). I get around that with cash backs from debit card purchases. Also my credit union belongs to a credit union federation, so I can get teller service at any federation branch. Some also offer banking by mail.
posted by fontophilic at 3:38 PM on December 8, 2009 [1 favorite]

You might try going to banks other than Chase (full disclosure: I hate Chase because of stupid fees they charged me) and ask if they'd give you a credit card if you moved your $7000 from Chase to them.
posted by Obscure Reference at 3:45 PM on December 8, 2009 [1 favorite]

if I want one I'm going to have to go to another bank

Don't get hung up on staying at one bank. There is nothing whatsoever unusual about having your checking at Chase (if you like, say, their ATM availability) and a credit card from Capital One (main issuer of secured credit cards). You don't have to move your checking account just because you open your credit card at a different bank. I have credit cards from banks in places I've never even been! I actively use six cards from five different banks and have checking accounts at two different banks, neither of which is a bank I have a credit card with. Go where you get the best deal.

You can also look at gas or store credit cards. These usually do not have an annual fee, which is hard to find in a secured card. Sears is a good store credit account to try for. They "maintain a security interest" in whatever you buy on the account, meaning they can repossess your Kenmore washer or whatever if you fail to pay for it. Most credit cards are unsecured, so if you don't pay them the issuer has no recourse but to harass you to try to get their money back. Sears is obviously in the stronger position so they are a little more lenient with their criteria. DO NOT apply for a Sears-brand Visa or MasterCard; those are unsecured and you probably won't get one until you have a credit history.
posted by kindall at 3:51 PM on December 8, 2009

You mentioned your dad is anti-credit-card, but if your parents have a credit card with decent history, they can help you out. All they have to do is add you as a user to the account (get a card in your name). This does not require you to have credit. Very soon, the history and current usage of said credit card will also go to your credit report. your parents do not even have to give you the card in your name and you never have to actually use it or spend a cent.

Dunno if that helps, depending on your parents' situation (could also apply to roomate, anyone who wanted to help you out). Best of luck!
posted by R a c h e l at 5:14 PM on December 8, 2009

I always thought that the fact that I was able to get through school with no debt and even some savings was a GOOD thing. Now it's as if I did something WRONG by paying my bills on time and not borrowing unnecessarily. What the hell is wrong with this picture?

The fact that we require people to borrow money in order to be treated like adults in this country. And then we wonder why people borrow too much.

Banks don't really care if you're good at living within your means as much as they care about you being able to pay off what you owe. That's what the credit scores are based off of.

I'll N'th going to a credit union-in general they're more likely to give out loans than larger banks. They might require you to set up a savings account-but you could probably just keep $25 and be fine. Even if you don't think you're part of a special group, look around-some of them pretty much just require you to live in-state.

PRBC might help you in certain situations (like trying to get an apartment), but not necessarily on loans.
posted by dinty_moore at 5:36 PM on December 8, 2009

It is sort of a catch 22. Nobody wants to extend credit because they have no idea whether you will pay it back or not.

Saving up and paying cash for stuff is great, but from the perspective of a lender, they don't know why- are you completely irresponsible and your mom takes your paycheck every month and if you ask nicely she lets you buy a car? Or are you just a responsible spender and never needed credit for anything? They don't know, and there is really no way for them TO know. Having a job is great, but they don't know what you do with that money. With interest rates being so low, why bother with an unknown when they have some deadbeat down the street who has $50,000 credit card balance, but who pays the bill EVERY MONTH, like clockwork, and shows no sign of ever stopping paying that bill?

(Remember, for them, it is all about cash flow. That $50,000 balance is nothing to them. That's just the price they paid for a lifetime annuity that pays them $2000 every month.)

I think the small loan advice is good. As well as the secured loan advice. Secured loans are less risky for the lender. Especially if they are secured by cash. You've got $7000 in the bank, right? Try to take out a personal loan secured by your savings. They will ask you why you are clearly insane, but explain that you need to build up a credit history. Or tell them that you want to buy your girlfriend an expensive gift, and if she sees the savings account go down, she will catch on and it will spoil the surprise. As long as the loan is secured by the cash, I don't think they care what you tell them it is for. If you really want to cut your losses, take the money you borrowed and buy a CD at some other bank with it.

After that's done, either try for another credit card, or next time you want a cellular phone, go out and get your own account. My first cell account (1993, Cellular One, purchased at a stereo store) required me to pay them a $500 deposit for the first six months. I think my first landline phone did too.

Another thing to try is to go to Costco and sign up for one of their American Express membership cards. It will cost you $50 a year in membership fees, but you can probably come close to making that up by buying mayonnaise by the gallon. Sometimes workplaces have special deals like that too, and their underwriting might be a little less strict.

Good luck!
posted by gjc at 5:52 PM on December 8, 2009

Oh, another thing to try is to see if your parents are buying a car anytime soon. If they are, see if you can take the loan out in your name, with them as co-signers. They keep the car and make the payments, but the loan is in your name and goes on your report as an account in good standing.
posted by gjc at 5:55 PM on December 8, 2009

I started with a gas card at 18, which usually has a limit of $500, and built up from there.
posted by lunalaguna at 6:40 PM on December 8, 2009

I was in your exact situation two years ago when I was 24 (and still am, to a certain extent). The solution I finally found was this: I happened to be taking two courses at my local community college, and that qualified me for a student credit card from Wells Fargo. I'm not a huge fan of WF, and I had to set up a checking and savings account with them in order to get the credit card (with the whopping limit of $1000), but it was a start.

Unfortunately, they apparently track EXACTLY how much you use your credit card, because I've had mine for over two years now, and have used it only eight or ten times, paying if off immediately each time... And when I attempted to apply for a very small loan from a computer company, I was turned down due to "insufficient use of credit." I'm really beginning to hate credit bureaus, reporting, and scores. Ugh.

Anyway, perhaps you could sign up for some random fun evening course and try that route? They really weren't stringent as to the definition of "student;" all I had to show was my student ID with a current sticker, if I remember correctly. I feel your pain, in any case - good luck!
posted by po at 7:19 PM on December 8, 2009

I was in exactly your situation at almost exactly your age. No debt of any kind, a good job, but my roommates had always paid utilities. I tried AmEx (longshot, I know), the bank I had a large account at and the bank I've had an account at since under the age of one. All turned me down flat, because I didn't have a credit history. The card I finally found was from Capital One - no fees, not secured, but a fairly low limit (something like $500, now up to a whopping $1000). I've been using it to pay a single reliable bill each month - cell phone, because I have it, but it could as easily be the first grocery run of the month. I only have the card to build credit, and after another year or so, will probably apply for an AmEx card - they've got better side-benefits, and said a few years of history would probably be enough.

It was definitely a super-frustrating process, for exactly the reasons you named. Hope this helps!
posted by lorimt at 8:24 PM on December 8, 2009

I was in the same position about a year ago. I went down the "secured card" road and worked well for me.

Also, n'thing the recommendations to look into credit unions. I switched over and wish I had done so years ago.
posted by kprincehouse at 8:37 PM on December 8, 2009

I'll nth auto loan, gas card, store credit card, credit union, and Capital One as good bets to start you off with credit.
posted by rabbitrabbit at 8:43 PM on December 8, 2009

Yeah, utilities are not often reported to the credit bureaus, even if they are in your name. I live alone and therefore all of my utilities are in my name and exactly zero of them show up on my credit reports. The reports do show records of inquiries when I first opened each utility account, but they are not reported on a monthly basis like a credit card or auto loan would be. So don't worry too much about that; it probably wouldn't have helped even if the utilities were in your name.

Aside: If you choose to join a credit union which is part of the nationwide Credit Union Service Center network, you can conduct almost any transaction at any participating credit union in the country as if you were at your local branch.
posted by Nothlit at 8:55 PM on December 8, 2009

Seconding/thirding/whatever the credit union, which was my own approach. I used to be you -- I had a lucrative summer job so I got through university with all my tuition paid upfront out of my own pocket -- and even when my bank sent me "pre-approved" applications, I was turned down. I called up once and asked why. The CSR pulled my file and said it showed I had no student loans. I told her (truthfully) I had paid my tuition by cheque every year. She mentioned there was no mortgage; I told her (truthfully) I rented. She said she saw no evidence of a car loan; I told her (truthfully) I didn't drive. It went on in this vein for some time until she mysteriously proclaimed, "You know, fraud is a very serious offense." I asked what prompted this and she declared point-blank, "You cannot be twenty-four years old and not be in debt." I allowed that I had some overdue library books, and she hung up on me.

I went the credit union route and mysteriously a couple of years later a credit card arrived form the bank that had so ostentatiously turned me down, along with a note that they were renewing my credit card. Ah.
posted by ricochet biscuit at 9:45 PM on December 8, 2009 [1 favorite]

Credit unions:
Not sure where you live in NYC, but I've heard good things about LESPFCU—although acronym is terrifyingly unpronounceable.

Credit card companies have gotten pretty overzealous in the past few quarters, in an attempt to show shareholders that they are no longer part of the problem. My card dropped from a $10,000 limit (which was, crazily granted without my even asking for it) to $3,500, to $700. And I have okay credit. The good news is that as the market loosens up, things should get easier for you.

Chase used to offer overdraft protection on checking accounts, which shows up as a line of credit on credit reports. If you sign up for the protection, and never use it, you'll have a no-fuss way of getting a month-to-month, paid on time account on your statement.* Also, I could be wrong, but I think your current bank account should be on the statement? Mine is on my report, at least.

*If you do use the overdraft protection, keep in mind that you have to pay Chase back, plus interest. Do so promptly.
posted by evidenceofabsence at 11:35 PM on December 8, 2009

Just wanted to add that when you go to the credit union, offer to switch your main bank account to them if they help you find a solution (small loan, secured card, whatever), it might add a little incentive for them.

Also, at 24 you might still be able to get a "student" card, especially if you can get a parent to cosign.
posted by susanvance at 6:23 AM on December 9, 2009

Good luck with the "small loan" request from your bank.

If that doesn't work, however: get your parents to cosign on a card. Even if it is a gas card (if gas cards have this option, I haven't checked).

Their credit will make up for your lack of credit, and you'll (probably) be approved. Also speak to your roommates about transferring utilities to your name.
posted by achompas at 8:41 AM on December 9, 2009

Ramit Sethi's website, I Will Teach You To Be Rich is a great resource for financial advice for young people just getting into the financial market. Don't let the name fool you - it's not about getting rich quick, it's about establishing long term financial growth and stability oriented toward young people. I know from my regular reading of his site that there's great pragmatic information there about establishing credit. The site is searchable, so you should be able to find some useful informaiton.
posted by ljshapiro at 9:51 AM on December 9, 2009 [1 favorite]

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