11 Smart Ways to Build Good Credit From Scratch

Easy Ways to Build Credit When You Have No Credit History

If you are pondering how to build credit from scratch, you gotta start somewhere. You can consider applying for a credit card, asking parents for a hand, or taking a student loan.

We are here to assist you to figure out how to build credit. If you are not comfortable applying for a credit card, bear in mind there are many ways you can build credit without a credit card. Here are the six credit building alternatives covered in this post.

  1. Keep tabs on your credit score open
  2. Build credit with a credit card
  3. Build credit with help from parents
  4. Talk to your lenders
  5. Keep using your card
  6. Work on your savings and credit at the same time
  7. Build credit with auto loans
  8. Rent
  9. Alternative data and cell phone payments
  10.  Start slow
  11. Build credit responsibly

Keep tabs on your credit score open

Credit score can be inaccurate. Following a study conducted by the Federal Trade Commission, one out of five credit reports have an error.

Watcht out on your credit, get your credit score, and a credit report card, free of charge from Credit Sesame. It breaks down what is on your credit report in simple English, how it impacts your score, and how to address it.

Since it simplifies everything, you should be able to spot mistakes. For example, if you discover an unpaid credit card that you know you paid or a bill in collections, you are certain it never existed, you can dispute the incorrect information and raise your credit score.

Build credit with a credit card

If you are just beginning to build your credit from scratch, consider applying for a secured credit card or student credit designed for people with no or little credit.

Here are some of the best entry-level cards to start with, which generally do not need a long or robust credit history for approval.

  • Secured credit cards: These credit cards require a cash deposit that serves as collateral if you miss a payment. If you can get a card that does not charge an annual fee, the better. Ensure the credit card company reports to all the three major credit unions, which can help you build or rebuild credit.
  • Student credit cards: These cards give young cardholders and students the chance to build credit- and they even come with promotional rewards and offers. One of the potential drawbacks is that they generally have higher interest rates and lower credit limits.
  • Store credit cards: These cards help consumers save money at their favorite stores and give those with little or little credit a chance to prove they can manage money responsibly. Be aware of high-interest rates these cards might charge if you carry a balance.

Build credit with help from parents

Your parents may be willing to lend you a hand by making you an authorized user on one of their credit cards, or even co-signing a loan with you. A close friend or another family member can also help you.

Authorized user

If your mum or dad makes you an authorized user on their rewards credit card, you can benefit. You will have the chance to build your credit while your parents rack up points or even cash back on every dollar you spend.

However, you should be careful since some credit cards have an annual fee for authorized users. The shortcoming for your parents is that they will be responsible for repaying the money you spent without paying. And if that case causes them to miss a payment or rack up a lot of debt, it can hurt both of your credit scores.


Whether or not you are seeking a credit card, buying your first car, or student loan, your parents may consider co-signing, which increases your chances of qualifying if they have a good credit score.

Unlike the other situation with an authorized user, you will both be on the hook for repaying the loan.

Bear in mind, if you are twenty-one, following the Credit Card Accountability Responsibility and Disclosure (CARD) Law of 2009, you either have an adult co-signer or prove that you make sufficient money on your own to be able to repay any money you use on your credit cards.

Talk to your lenders

It is always a good thing to ask questions. To frame up an account, some lenders may be willing to assess non-traditional data, such as rental history, installment, or utility plan payments. Use your new account to start to build a more traditional credit file.

Keep using your card

Most of us know bad credit information is removed after seven years. However, did you know good information falls off after ten years.

Even consumers with a good credit report are at risk of losing it if they pay off all of their accounts and do not touch them again.

Rather than celebrating by cutting up your cards once you pay them off, use them; however, keep paying them off.

You can even set up autopay on each card for a small monthly bill, such as a cell phone plan or Netflix. Then pay off your balance entirely per month.

Work on your savings and credit at the same time

Through a company known as Self Lender, you can take out a loan and open a deposit (CD) for you with the fund from the loan. You will make monthly payments to access the CD. After you pay off the loan, the money is all yours again.

All your payments are reported to the major credit unions, assisting you to build your credit responsibly. And it helps you build savings since you will receive the sum you have been paying into at the end of the term.

You can make an account online for free. After you sign up, you can play with Self Lender’s straightforward tool to evaluate your monthly payment and total loan. Find the balance you need, and you can fill out your application online and be accepted faster.

Build credit with auto loans

Purchasing a car is another way to build credit, provided you make on-time payments on your auto loan. Bear in mind; if you pay cash, you might save money on interest; however, it will not improve your credit.

This is one-way students may be able to jumpstart their credit history. Of course, it does not make sense to purchase a car solely for the sake of building your credit, so ensure it is a necessary purchase before asking the dealer to hand over the keys.


In some situations, renters might also build credit by making on-time payments. If your landlord does not report your positive payment history to the credit reporting agencies, check out services such as PayYourRent and RentTrack.

Also, do not stop there; ask your utility company to report your on-time payments too.

Alternative data and cell phone payments

Some lenders look at alternative forms of data when determining your creditworthiness (like cable TV, rent and cell phone payments). The CFPB is now looking at the benefits and risks of alternative data sources in making funding decisions.

Presently, it is optional for these companies to report your information, so it might help to ask them.

Start slow

If you try to apply for a lot of credit cards in the same period, you will not just risk rejection, but your credit score may actually suffer, since every time you apply, you can make a hard inquiry on your report.

Since overdoing it at the beginning is a rookie error, various hard credit inquiries within a short time can impact your credit score negatively. Besides, it is simple to get in over your head with credit card debt if you are charging purchases to multiple credit cards at the same time.

Beginning slowly will encourage you not only to be responsible for credit use but also to choose which credit cards you apply for carefully- and many have huge benefits.

Build credit responsibly

Now for the best part, if you are just starting your credit journey, you might have more credit-building options than you think.

Getting accepted for a credit card is only the first step. Below are a few recommendations to bear in mind when you begin this journey:

  • Do not miss a payment: Remember, late payments can remain on your credit reports for years and harm your credit. Do your best to ensure you make each payment on time, even though you can only afford the minimum payment.
  • Do not pay interest: Unlike the popular belief, you do not need to have a balance to build credit. Consider paying off your whole balance per month to avoid interest charges.
  • Do not spend too much: Whereas you may be excited about breaking in your new credit card, do not use more than thirty percent of your available credit. This means if you have a credit limit of $1, 00, try not to spend more than $300. Maintaining a low credit utilization will assist you in improving the overall credit health.

It is essential to remember you are not alone. Following the Consumer Finacial Protection Bureau, an approximate of forty-five million Americans may not have credit scores. Some people have a credit history that has gone stale or is not yet enough to produce a score under the popular scoring models, while others simply do not have a credit history.

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