College grads often enter the workforce with high expectations, and a good outlook, but little employment or financial history. At this time in their lives they may need a credit card or car loan, but without a track record it might be hard for them to qualify. Credit card issuers approve consumer cards based on financial data like credit history, monthly income, and employment. This history is required for approval, so if a company has little financial information to go on, odds of this are pretty slim. Without any type of positive history, getting new credit or a loan can be impossible. But, there are a few techniques that can help a college grad or anyone else with little or no credit history.

Here are the top 4 easy methods to build a history without a credit card:

A Credit Builder Loan

Many credit unions offer a type of loan that is set up specifically to help consumers build or repair their credit scores. This “credit builder loan” works over a period of usually 6 to 12 months and costs very little in interest. With the credit builder loan program, a credit union will lend the consumer $250 – $1000 and place the cash in an interest bearing CD. They will then pay off the loan over the 6 – 12 month period, and then collect the money from the CD or let it continue to accrue interest. This is a painless process that can help anyone build a history or raise a credit score. A “credit builder loan” can be preferable to a traditional loan, as is it very low interest and the credit union can help walk you through this process.

Set Up An Account With PRBC

The alternative credit scoring company PRBC uses payment history as a way to build your credit. Currently FICO scores are not calculated using rent payments, utility bills, insurance payments, or cell phones plans. Once you set up an account with PRBC, they will keep these records and work with FICO to create a score through FICO’s Expansion Score program. Creditors and lenders have the ability to access this score and may approve an application for a loan or credit based on this information. FICO states that the credit data provided by “Expansion Score” is just as accurate at predicting risk as their traditional credit scoring system. This means lenders and creditors shouldn’t have any bias towards approving an application with this alternative data. Currently, there isn’t much information available that compares approval rates using alternative information compared to traditional FICO scores. But, according to the Equal Credit Opportunity Act, creditors legally must consider any information that supports a borrowers “credit worthiness”.

Get a Co-Signer

Getting a parent, close relative, or friend to take responsibility for a debt as a co-signer is one way to get approved with no history. By agreeing to co-sign for a loan or credit card, the co-signer will be completely responsible for this debt if it goes into default. If an applicant has a co-signer, they should keep them in the loop about their plans for the card, and how they will pay for the bill. They might even want to send them a copy of your credit card statement each month, so they feel secure that the borrower is using it responsibly. Due to the recent CARD act, it may be necessary for people under 21 to have a co-signer in order to be approved for a new credit card.

Secured Cards

Secured credit cards can be a way that almost anyone can start building credit history, without a traditional credit card. These cards work just like other credit cards, but they debit funds out of a prepaid account. This takes away the risk for the card issuer, so most people can qualify for these cards, even with a poor credit history. Secured cards may have more fees than unsecured credit cards, so applicants should know how they will be charged, before they make a large deposit. It is also important to make sure that the card you pick reports all transactions to the 3 major credit bureaus. Since you may be using this card to build your credit history, this feature is essential when choosing a secured card.

A financial history is important because it shows how much of a risk you are to a lender. Without this, these companies will have no evidence that you are responsible with your money. By using one of the techniques above, you can start building a financial record that businesses can use to evaluate your credit worthiness. The process of building credit doesn’t happen overnight. But, with time and good financial habits, you will be on your way to qualifying for unsecured cards and loans.

About:

Ross runs the site Great Credit Score, which focuses on topics like personal finance, credit, and debt. He also plans to document his experience investing in dividend stocks, bonds, and precious metals.