Do You Have Insufficient Credit History? Here's What To Do

Updated: Feb. 12, 2019 

mike-pearson

If you're trying to overcome an insufficient credit history, you have a handful of options you can try to get it moving in the right direction.

There are four primary ways we recommend to jumpstart your credit profile:

  • 1
    Check that your personal information is correct. Sometimes, lenders can have errors with your personal information, causing your credit to erroneously show up as insufficient. 
  • 2
    Ask your service providers. If you can convince your cable company or cell phone provider to report your on-time payments, you will build credit history quickly.
  • 3
    Apply for a secured credit card. When you make on-time payments with a secured credit card, they get reported to the credit bureaus, helping to establish your credit.
  • 4
    Take out a mini-loan. While risky because of the high interest rates, mini-loan payments also get reported to the bureaus. 

This post will walk you through all four of these options, and give you some additional details around insufficient credit as well.

4 ways to overcome insufficient credit profile

1. Check your personal information with lenders

It's possible your credit is showing up as "insufficient" due to an error with your personal information—banks, insurance companies, and other lenders could have one piece of your information incorrect, such as your name (a misspelling), your address, date of birth, or social security number. 

So, it's definitely a good idea to get on the phone with your lenders to double-check they have your personal information correct.

Tip: also make sure that whenever your applying for any type of credit, that your name and address stay as consistent as possible. It's a potential red flag to lenders if you're constantly using different personal information when trying to borrow money. 

2. Ask your service providers to help you out

It seems unfair that you're probably paying things like cable, gas, oil, electricity, and cell phone bills every month, but not getting any credit (pun intended) for those payments—those type of providers generally don't report any (positive) payment history to the credit bureaus, so it doesn't do you any good?

But what if they did report?

Then your payment history would go a long way to helping you build up a good credit score (assuming you're paying those bills on time, right?)

So what can you do? Pick up the phone and ask them if they'd be willing to report your on-time payments! It doesn't hurt to ask, and there's a reasonable chance at least some of them will help you out.

3. Apply for a secured credit card

A secured credit card is a relatively easy way to build your credit, and you use your own money to do so.

It’s basically a pay-as-you-go card: you put a certain amount of money on the card, use it, and make sure the balance is always paid off every month. Then, your payment activity gets reported to the credit bureaus, allowing your credit score to rise in a few months.

Just keep in mind that interest rates can sometimes be high on a secured card, so be smart when you're using it.

4. Take out a mini-loan

This one can be a bit trickier, but even with insufficient credit history there are still some lenders, like LendUp, that will give you the chance and look past your lack of credit score. 

And when you pay back the loan on time, it gets reported to the credit bureaus. 

What's the catch?

Well, without a credit score you're likely going to pay a higher interest rate on the money you borrow—for example, on a $200 loan, you'll pay about $35 in interest and have to pay it back in about two weeks—so keep that in mind and make sure you will be able to pay it off immediately before you fall behind on your monthly payments.

What does it mean to have "insufficient credit history"?

"Insufficient credit history" means that there just hasn't been enough data collected on you in order to give you a credit score.

If you think about it, what lenders look for before approving a loan or a credit card is your credit history.

And having “insufficient” history just means you haven’t borrowed any money over the last 7 years and there's no paper trail for them to follow to prove to them you're going to be a trustworthy person to lend to. 

Consequences of having no credit history

We're not going to lie, it can be a struggle not having any credit history, mainly because of these two reasons:

You'll have difficult borrowing money

The lack of a credit history means that you’ll be less likely be approved for a loan or mortgage, and if you do secure an approval, you're going to get stuck with crazy high interest rates.

You'll be considered a high-risk borrower 

Whenever you apply for a mortgage or loan, you must prove you can be trusted, and that proof is shown via your past credit behavior. Without any credit history, creditors will doubt your creditworthiness and consider you a high-risk borrower.

No credit history vs poor credit history

What's worse: having no credit history, or a poor credit history?

It's actually not even close:

A poor credit history basically sets you up for denial when you go apply for loans, credit cards, and insurance. Even renting an apartment can be difficult with bad credit.

But, having no credit still gives you a chance.

There is a much higher probability of a bank giving you a credit card if you’re young and just starting out in life because they know that you have to start out somewhere. 

It can be tricky, but as long as you make your payments in full and on time, then you'll slowly build up your credit score and be eligible for other financial benefits such as applying for loans or renting apartments, as well as better credit cards. 

How long does it take to overcome insufficient credit history?

Generally speaking, to overcome insufficient credit history, it can take a month to six months.

The key is that you have to be consistent paying your bills to build up the data required to give you a good credit score. So, be patient and prompt with your payments and your credit history will start to build in due time. 

It really is a game of trust and patience, and you’re being handed an opportunity to show that you can pay your bills on time. As long as you keep up with payments, then the more likely you are to gain yourself a good credit score and sufficient data to earn a good credit history. 

Make sure that you keep all of your balances low on credit cards and don’t try to move the debt around by paying off credit debts with other credit cards.

Can you get a credit card with no credit history?

Trying to get a credit card with no credit history is a bit of a chicken and egg conundrum—you need credit history to get a card, but you need to get a card to build up history.

So, what are your options?

Here are five of them: 

  • 1
    Borrow someone else’s credit
  • 2
    Become an authorized user
  • 3
    Open a store card
  • 4
    Borrow from yourself
  • 5
    Open a secured credit card

If you want to learn more about how to "build credit with no credit", then check out our guide to rebuilding your credit:

Wrapping up

It can be a frustrating experience when you're trying to build your credit, but your "insufficient credit history" is holding you back from borrowing money.

But, with a little persistence, hustle, and strategic moves, you have a good chance of getting some on-time payments reported to the credit bureaus so you can build up your credit score.

About the Author


mike-pearson

Mike Pearson

Mike is a recognized credit expert and founder of Credit Takeoff. His credit advice has been featured in Investopedia, CreditCards.com, Bankrate, Huffpost, The Simple Dollar, Reader's Digest, LendingTree, and Quickbooks. Read more.

Related Posts