How to Build Credit From Scratch

Having no credit history is almost as challenging as having bad credit. Lenders can't assess your risk, so they often decline applications or offer unfavorable terms. The good news is that building credit from zero is completely achievable.

Understanding Credit Scores

Your credit score is calculated from five factors:

Payment history (35%) — paying on time is the most important factor
Credit utilization (30%) — how much of your available credit you use
Length of credit history (15%) — how long your accounts have been open
Credit mix (10%) — having different types of credit
New credit inquiries (10%) — how often you apply for credit

Step 1: Get a Secured Credit Card

A secured credit card is the most reliable way to build credit from scratch. You provide a security deposit (typically $200-$500), which becomes your credit limit. Use it for small purchases and pay the balance in full every month.

Good options include Discover it Secured, Capital One Platinum Secured, and cards from your local credit union. Look for cards that report to all three credit bureaus.

Step 2: Become an Authorized User

Ask a family member with good credit to add you as an authorized user on their credit card. Their positive payment history gets added to your credit report. You don't even need to use the card.

Step 3: Try a Credit-Builder Loan

Credit-builder loans work in reverse: the lender holds the loan amount in a savings account while you make monthly payments. Once paid off, you receive the funds. Many credit unions and online lenders like Self offer these with low monthly payments.

Step 4: Use Rent and Utility Reporting

Services like Experian Boost, RentReporters, and Rental Kharma report your rent payments to credit bureaus. Since rent is likely your largest monthly expense, getting credit for on-time payments can meaningfully boost your score.

Best Practices While Building Credit

Always pay on time — set up autopay for at least the minimum payment
Keep utilization below 30% — on a $500 limit, keep your balance under $150
Don't apply for multiple cards at once — each application creates a hard inquiry
Be patient — it typically takes 3-6 months to generate a FICO score
Monitor your credit — use free services like Credit Karma or annualcreditreport.com

Timeline: What to Expect

Month 1-2: Open a secured card, begin using it for small purchases
Month 3-6: Your first credit score appears, typically 630-680
Month 6-12: With consistent payments and low utilization, expect 680-720
Year 1-2: You may qualify for unsecured cards and better terms

Common Mistakes to Avoid

Carrying a balance to "build credit" — this is a myth and costs you interest
Maxing out your secured card
Missing even one payment
Closing your oldest account once you get a better card

The Bottom Line

Building credit from scratch takes patience, but the path is straightforward: get a secured card, use it responsibly, pay on time, and give it time. Within a year, you'll have a solid credit foundation.