Building Credit from Scratch: Best Card Options for High Earners with No Credit History
If you're a high earner with no credit history, building a credit score can be challenging. However, with the right approach, you can establish a solid credit profile. This article discusses the best strategies and credit card options for individuals with a zero credit score but making six figures.
Why Starting with No Credit Can Be Difficult
If you have no credit history, getting a great card will be more difficult. It's important to start by getting a card with no annual fees, even if it's not the most ideal option. Use it responsibly for everyday expenses like gas and groceries, and make sure to pay the balance off every month. Your credit score will improve notably with regular, on-time payments.
Secured Credit Cards: A Step in the Right Direction
Secured credit cards are an excellent starting point for those with no credit history. These cards require you to place a deposit with the issuer, and the card's credit limit is typically equal to the amount deposited. For example, if you deposit $5,000, your credit limit might also be $5,000. After a year of timely payments and responsible account management, the issuer may release your deposit and convert the card to an unsecured one. By the time you have 5 or more secured cards, you'll have built a substantial credit history.
The Importance of a Diverse Credit Portfolio
To achieve the highest credit scores and build a robust credit profile, it's crucial to keep your credit mix diversified. Having multiple credit cards and at least one installment loan is beneficial. The more types of credit you have, the better your credit score will be. Even if you only have one or two credit cards initially, having more than one helps to establish a "thick" credit file. A "thin" credit file refers to having minimal credit history, which can negatively impact your credit score.
Authorized User Accounts: A Quick Way to Build Credit
A great way to build credit quickly is by becoming an authorized user on several high-limit, aged credit cards with good credit histories. Primary cardholders' payment histories and credit limits will be reported to your credit reports, helping you establish a solid credit score faster. Keep in mind that not all issuers consider authorized user accounts, so it's important to verify this with the card issuer. However, in most cases, being an authorized user can significantly improve your credit score. The advantage of this method is that the primary cardholder doesn't need to provide you with access to the accounts, ensuring no risk to them.
Choosing the Right Primary Cardholder
When picking a primary cardholder to make you an authorized user, choose someone with a perfect credit history, high credit limits, and a long credit history. Consider relatives or close friends who meet these criteria. Trust is key, as a poor credit history on the primary cardholder's account could work against you.
Combining Strategies for Maximum Impact
The best and quickest results can be achieved by combining both secured credit cards and becoming an authorized user with the right primary cardholder. This dual approach will give you a strong foundation for building your credit history and score.
Summary and Next Steps
Building credit from scratch is a gradual process, but with the right strategies and card options, you can establish a positive credit history quickly. Start with secured credit cards, focus on responsible and timely payments, and consider becoming an authorized user on high-limit credit cards. By taking these steps, you can improve your credit score and open up a world of opportunities, such as lower interest rates on loans and financial products.