How to build credit from scratch

Why it’s hard at first

With no credit history, there’s nothing for a credit score to measure, so many banks turn down applications they’d approve for someone with a few years of on-time payments. The way out is a first account that reports to the credit bureaus, used well for a while.

FICO generally needs at least one account that’s been open for six months or more, and one reported in the last six months, before it can give you a score. VantageScore can sometimes score you sooner.

Ways to get your first account

• Become an authorized user. A family member with a long, clean history adds you to their card. Most banks report the account on your report too, so you can start building history before you apply for anything. It only helps if they pay on time and keep the balance low. See authorized users, explained.
• A secured card. You put down a refundable deposit, which usually becomes your credit limit, and use it like any credit card. Pick one that reports to all three bureaus, and check whether the bank reviews accounts for an upgrade to a regular card and the deposit back.
• A student card. If you’re in college, some banks offer cards for students with little or no history.
• A credit-builder loan. Some banks and credit unions hold the loan amount in an account while you make monthly payments, then release it to you. The payments are reported, so they build history.

The habits that build a good score

1. Pay on time, every time. Payment history is the biggest part of your score. Turn on autopay for at least the minimum so a busy month never becomes a late payment.
2. Keep balances low. Use a small share of your limit. Paying in full every month also means you never pay interest.
3. Apply for new credit slowly. Each application can lower your score a little, and several in a short time looks risky to banks.
4. Keep your first card open if it doesn’t charge a yearly fee. Its age helps your history keep growing.
5. Check your reports. Free every week at AnnualCreditReport.com. Fix mistakes early.

How each of these affects your score is in how credit scores work.

How long it takes

There’s no shortcut. With on-time payments and low balances, many people have a solid score within a year or two. Anyone who promises to fix or build your credit fast for a fee deserves a hard look: you can do everything here yourself, for free.

Moving up to a rewards card

Once you have some history and a good score, a card with no yearly fee and simple rewards is a natural next step. Premium travel cards usually expect good to excellent credit and a longer history.

Plan your applications too. Chase, for example, is widely reported to turn down most applications from people who’ve opened five or more cards in the past 24 months, so a few cards from other banks early on can rule out Chase’s for a while. See the Chase 5/24 rule.

For education only, not financial advice. Every bank decides applications its own way.