5 Steps to Build a Credit Score From Scratch

Photo (cc) by 401(K) 2013

Some experts will tell you that having no credit is worse than having bad credit, and there might be some truth to that.

When I was first starting out on my own, I wanted my own cellphone plan. So I headed to the store and was turned down flat because I didn’t have a credit score.

The rep told me, “Buy a stereo at a pawn store to build up some credit and come back.” I didn’t do that (and you shouldn’t either) but I did build my credit. A few months later I had a cellphone, and today I have excellent credit scores.

If you’re looking to build your credit from scratch, take these steps:

1. Start small

In order to have a credit score, you’ll have to get and use credit. Start off small by applying for a low-limit credit card or store card. Once you’re approved and activate the card, your credit limit and your monthly charges will appear on your credit history with probably at least one of the big three credit bureaus — Equifax, Experian and TransUnion.

Finding a credit card can seem overwhelming, but we offer a credit card search tool. You can also try your bank. I got my first credit card from my credit union.

2. Try a secured credit card

If you’re having trouble getting approved for a traditional credit card, try a secured card. You’ll have to put down a deposit, but these cards have easier approval qualifications.

However, make sure you read the fine print. Some secured credit cards carry high interest and have large annual fees. Look for a card with a lower interest rate (better yet, pay the balance off in full each month) and the option to “graduate” to a traditional card, meaning you can qualify for a traditional card in a year or so if you manage the secured card responsibly. Also, be sure the card company reports your payment history to the credit bureaus.

3. Leverage what you already have

In my case, I had moved out on my own and had a few bills I paid every month. To bulk up my credit history, I called my utility company and cable provider and asked them to report my monthly payments to the credit bureaus. To my surprise, they agreed. They only reported my good behavior once, but it gave my score a small boost.

Take a look at your bills. If you make monthly payments, you might be able to get those reported to the credit bureaus. But you’ll have to ask. Generally, wireless providers, utility companies and cable companies don’t report payments to the credit bureaus automatically.

4. Create an action plan

To have a great score, you’ll need a history of timely payments and a mix of credit, but you shouldn’t try to take it all on at once. Instead, create an action plan to build your score over time.

For example, my first credit card had a $300 limit. I planned to charge small amounts on the card — no more than 30 percent of my credit limit — and pay the bill on time each month for six months before checking my credit score. After six months, my score had increased, so I applied for a retail store card.

I kept using those two cards sparingly and responsibly, and after a year I checked my credit score again. Since I had a mix of credit and a good payment history, my score had improved enough for me to apply for an auto loan, which gave my credit history a big boost.

5. Be responsible

The most important step is to be responsible. Because you don’t have a long credit history, small mistakes can have a big impact. Follow these rules:

  • Don’t send in a dozen credit card applications hoping to get approved. Applying for too much credit lowers your credit score.
  • Don’t take on more credit than you can manage. Otherwise, you might be tempted to overspend and end up in debt.
  • Pay your credit card bills off in full each month. That’s not so much to help your credit score, but to save you from paying interest.
  • Never max out your card. That can lower your score. Restrict your spending to no more than 30 percent of your credit limit.
  • Always pay your bills on time.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
10 Common Ways Seniors Get Scammed
10 Common Ways Seniors Get Scammed

Here’s what to watch for to make sure you don’t fall prey to some of the biggest rip-offs targeting seniors.

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

9 Affordable Ways to Make Your Home Look Expensive
9 Affordable Ways to Make Your Home Look Expensive

These products from Amazon add elegance to your home without the expense.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

8 Surefire Ways to Get Rid of Debt ASAP
8 Surefire Ways to Get Rid of Debt ASAP

Here’s how to pay off debt fast and pain-free.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

This iconic dinnerware is prized for everyday use as well as reselling for profit.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

Beware This Hidden Ingredient in Rotisserie Chicken
Beware This Hidden Ingredient in Rotisserie Chicken

Something foul may lurk in those delicious, ready-to-eat birds.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

7 Big Purchases You Should Never Make
7 Big Purchases You Should Never Make

Sometimes a big-ticket purchase is nothing more than a big waste of money.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

5 Products You Should Never Buy Generic
5 Products You Should Never Buy Generic

Sometimes the brand-name version is clearly superior.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.