Building a Credit Score from Scratch

Updated October 27, 2021

You have to be careful about the advice you follow when it comes to your credit —especially when building credit for the first time. Have you ever Googled for credit tips? If so, you probably discovered a tsunami of articles and ideas clamoring to show you the best ways to transform your credit situation.

From videos to podcasts, there are many “gurus” eager to share their credit secrets with you. Add in the well-meaning credit advice you may receive from family, friends, and acquaintances, and before long your head will be spinning with dozens of contradictory credit improvement strategies.

It’s information overload at its finest.

Unfortunately, the truth is that many self-proclaimed pros and even your loved ones can give bad advice when it comes to credit. Most credit advice is likely given with a well-meaning spirit; however, bad credit advice can hurt you even if the damage is unintentional.

Below are four proven credit tips that could help you build great credit from scratch. These tips aren’t a magic wand, but they do represent a solid credit-building plan that might help you.

Tip #1: Do Not Assume Anything

If you’re preparing to build credit for the first time, you might think that your credit reports are blank slates. Yet assuming that this is the case without verification is a mistake. (You know what they say about assuming.)

Any credit-building journey should start with a review of all three of your credit reports from Equifax, TransUnion, and Experian. It’s easy to get these reports for free. Just visit AnnualCreditReport.com.

CreditWriter Tip:

Thanks to the Fair Credit Reporting Act, you can claim a free credit report from each bureau via this website once every 12 months. 

You can also access your three credit reports and scores (if they exist) via a variety of credit score apps and credit monitoring services. Some are free; others may charge a monthly fee. 

Develop the habit of checking your credit reports often. The Fair Credit Reporting Act (FCRA) gives you the right to expect accurate information to appear on your credit reports. Yet it’s up to you to monitor your your credit reports to ensure that they remain error-free.

Decrypting Credit:

If you discover errors on your credit reports, you can dispute those errors with the credit reporting agencies.

Tip #2: Establish Revolving Accounts

After you check your three credit reports — and if they are indeed blank — you might consider opening a few positive credit accounts. Credit cards can potentially be a good place to start when you have zero established credit.

Secured credit cards in particular tend to feature more lenient qualification standards compared with other financing options. Even with no credit or bad credit, you might be able to qualify for a secured credit card. Just be prepared to put down a security deposit (typically equal to the credit limit on your account).

You might be able to qualify for certain unsecured credit cards as well. Student credit cards or cards designed for people who are new to credit are usually your best bet as a credit newbie.

Premium rewards credit cards can be appealing, but you should probably avoid these for now. Although these cards feature some great benefits, they tend to require an excellent or good credit score to qualify.

If you open a credit card account, it’s essential to pay on time — always. You should also aim to pay off your full statement balance each month. This smart habit can save you money in interest and keep your credit utilization rate low (a credit score win).

Decrypting Credit:

Manage your new account well and it might help you build positive credit and stronger credit scores. But if you make mistakes with your new credit card (i.e., late payments or high credit utilization), the same account could result in a bad credit rating.

Tip #3: Open an Installment Account

Credit scoring models, like FICO and VantageScore, often reward you when you show you know how to manage a variety of account types. Consumers with a healthy mix of accounts showing up in their credit reports may earn higher credit scores.

But there’s a catch here (or, rather, an obstacle). With no established credit, it can be difficult to qualify for certain types of loans. Your solution? Enter the credit builder loan.

Numerous credit unions and online lenders offer credit builder loans with the potential to help you rebuild or build credit for the first time.

Here are the basics on how credit builder loans work (though you should check with your lender for specifics.)

  • Credit builder loans tend to feature small loan amounts (i.e., $500 – $1,000).
  • The lender holds the funds in a savings account instead of giving you the loan proceeds right away.
  • You make a series of payments (often over 12 months or less) to the lender.
  • Once you make your final payment, the lender releases your loan proceeds (plus any interest earned minus interest and fees you paid).

If you manage your credit builder loan responsibly, you should have several months of on-time payment history showing up on your credit reports at the end of the process. Remember, on-time payments are essential. When you pay late, the account could have a negative impact on your credit rather than a positive one.

Decrypting Credit:

Ask the lender if it reports to the three major credit bureaus before you apply for a credit builder loan. If the account won’t show up on all of your credit reports, there are better credit-building options available.

Tip #4: Ask a Loved One for a Favor

There’s another strategy you can use to build credit from scratch. It involves asking a loved one for a favor. A friend or family member might be willing to add you as an authorized user to an existing credit card account.

Be sure the credit card has a flawless payment history and a low credit utilization rate before your loved one adds you as an authorized user on the account. Otherwise, becoming an authorized user could backfire and hurt your credit instead of having a positive impact.

It’s also worth pointing out that authorized user accounts won’t show up on credit reports 100% of the time. Yet in many cases, the account will show up on one or more of your credit reports within a few months of your loved one adding you.

Decrypting Credit:

As a parent, authorized user accounts represent a great way for you to help your children establish credit without dipping your toes into the dangerous waters of co-signing.

What’s Next?

It takes around six months from the time you open your first account to become eligible for a FICO® Score. (This assumes, of course, that the lender reports the account you open to the credit bureaus.) So, your best bet is to apply for your first credit-building accounts long before you intend to seek major financing.

No matter which type of account (or accounts) you open, the key is to use them in a responsible way. A budgeting app and smartphone reminders can help you keep up with various due dates. Automatic payment drafts can also be a helpful backup in case you ever forget to pay a bill.

Earning and keeping a good credit score is a lifelong journey. But the effort you put forth can pay off again and again. The benefits of having good credit can transform your financial life.


Michelle Lambright Black is a leading credit expert, writer, speaker, and credit expert witness with nearly two decades of experience in the credit industry. She is an expert in credit reporting, credit scoring, financing (mortgages, credit cards, loans), debt eradication, budgeting, saving, and identity theft. She’s featured in print monthly with brands such as FICO, Forbes, Reader’s Digest, LendingTree, Experian, and more. Connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).

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