How to Build Your Credit Score (from Scratch)

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Okay, so true story: I've had nightmares about one day applying for a loan for a car or our first house. I KNOW I have no credit, but I didn't know where in the world to begin to build it! Everything I've read has been so confusing! Credit cards, no credit card, pay the minimum, pay it off!? I'm so glad I've found this easy-to-understand tutorial on how to build my credit score from scratch. This changes everything! #creditcardhacks #creditscore #buildcreditscorefromscratch

In all honesty, I don’t pay that much attention to my credit score. I’ve never had to worry about “getting one”, as I married young and Joseph’s good credit automatically passed onto me before we bought our first home.

My sister, however, just applied for her first credit card and was promptly denied because she had no credit score at all. She pays all of her student loans on time, but doesn’t have an extensive credit history to show for it.

How are you supposed to build a credit score when no one will give you a chance to start? Surprisingly, this happens a lot. And it’s not just the college students who are running into trouble.

There are a lot of controversies regarding credit scores in the financial world. Dave Ramsey says it’s just an indicator of debt, yet I can’t even begin to tell you how many emails I get from readers who have followed his plan, used cash only, and now can’t get a mortgage at all for their first home.

Of course, paying cash for everything would be ideal, but I also don’t think it’s wrong to apply for a mortgage either. In that case, credit scores can be a very good thing, and if you ever see yourself borrowing money down the road — whether it’s for a home, car, or business, you’ll want to have one that is squeaky clean. Some landlords even check it for a rental application!

Here’s how to build your credit score from the ground up, especially when you have little or none to start.

1. Get a Starter Credit Card

I know it’s not popular opinion in frugal circles, but I’m of the mindset that credit cards are not evil, and can be used wisely. And getting a starter credit card can begin building your credit score right away!

There are very specific credit cards out there geared toward college students and young adults who are just starting out in the financial world. Many of them come with low credit limits {$300-$500}, so you can learn to use them properly without sending yourself into a financial crisis before you graduate.

I would strongly encourage you to start with very small purchases if you’re new to a credit card, such as groceries or gas, and use that card only for those items until you have a handle on the process and are paying it off every month on time.

Credit cards can be great, but they do come with some risk, especially if you are not disciplined enough to pay them off every month. And the key to a great credit score is paying those bills off in full!


2. Become a Joint Credit Card Holder

If you have a parent, friend, or family member who is willing to add you to their account as a co-signer, their credit score will automatically be transferred to you as if you had the credit card the entire time. This is what I did by jumping on Joseph’s card and eliminating the need to apply for my own.

Again, this can be very risky on the part of the original account holder. If you don’t pay your portion of the credit card, all the blame lies with the person who first opened up the account, and has potential to damage close relationships.

That means you need to both form an agreement beforehand on who will be responsible for what, and this is best done in writing. Even though we want to trust our family and friends, doing business with them can get kind of sticky!

3. Diversify

When you finally open a credit card account {or hop on someone else’s}, you still have an uphill battle to build a good credit score, meaning it won’t happen right away.

You need a good mix of accounts to give you more credit potential, even if you don’t end up charging that much to your card. That’s also why you should be careful when closing credit card accounts, because the debt-to-credit ratio is less in terms of your outstanding debt versus credit.

This can be as simple as getting a gas or travel card for fuel expenses and/or plane tickets, and only charging those specific purchases to each card. However, you should also be aware that opening too many accounts at once can negatively affect your score. Credit scores are a delicate thing, yes?

4. Pay Your Bills on Time

Paying your bills on time seems like a no-brainer, but even I have missed a bill or two at some point! And when a company calls the credit bureaus to report your past due balance, you can get a pretty bad rap and a ding on your credit score as a result.

Unpaid bills usually won’t get reported to the credit bureaus right away {when I worked at a doctor’s office, we submitted them at 120 days over due}, but every company is going to be different so you’ll want to take care of past due balances as soon as possible.

5. Be Patient

Your credit usually starts in the 600’s, and ultimately you’ll want to see it rise into the 700-800’s for an awesome score, but the reality is…….this takes time…..sometimes even up to 10 years for really excellent credit. Just another reason why you need to start building credit right now!

The best you can do is to keep charging a few purchases each month, pay your bills in full and on time, and as your credit limits increase, your score will also increase. Consistent, monthly, and timely payments are KEY.

As your credit score grows, don’t forget to check in every once and while to make sure everything is on track. You can get a free credit report within minutes, and if any strange activity has made it’s way onto your report, it’s better to solve the problem now than when you apply for your first mortgage.

And when you finally land that home or business loan, you’ll thank your squeaky clean score for getting you such a good rate!

Want more? Head on over to this page where I’ve compiled even more smart credit score tips as well as plenty of ideas about how to manage money better.

How have you built your credit score?

Disclosure: Some of the links in the post above are affiliate links. This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. Read my full disclosure policy here.

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  1. Excellent tips on building credit from scratch. I had credit scores in the low 600 range 36 months ago and the 3 credit bureaus Transunion, Equifax and Experian each had a different score for my poor credit rating. I applied for a Capital One Platinum secured credit card and was approved with a $200 credit limit. I added $100 each month while keeping my utilization between 10% and 20%. After a year of on time payments and no missed payments my credit score increased to 680 across all 3 credit bureaus. Also, I got a small loan ($500) from my local credit union and repaid the loan in 6 months. After 18 months of responsible use and having a credit mix of a credit card and the installment loan my credit score increased to 750+ across the 3 credit bureaus. Having the secured credit card and the installment loan did wonders for credit score and taught me a valuable lesson on the importance of having good credit and how to manage it.

  2. I always had great credit, until my husband and I got into credit card debt a few years ago. Amazingly, even though we owed a lot, both of our credit scores remained in the “very good” range, until we took out a home equity loan to consolidate the debt. As part of the process, we were required to close several credit card accounts, which erased a lot of my credit history. My score went down to the “good” range, as a result. I don’t regret taking out the loan at all, since it made a big difference in our ability to pay the debt off, but I’m anxious to get my score back up where it was. (Not that we’re planning to apply for more credit any time soon, but you never know.)

    1. Credit card debt can be an easy trap to get into when building a credit score, but I’m so glad to hear you’ve been able to pay it off! Slow, but steady will ultimately be what wins the credit race. You have time, and because it’s still “good” I wouldn’t worry about it too much!

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