How to Build Credit From Scratch
With no credit history, it can be hard to get approved for an apartment, a car loan or even a phone plan. Here are the easiest ways to start building credit, from secured cards to credit-builder loans, and how long it takes to get a score.
By Pond.com editors Updated 2 min read
Quick answer
- Start with a secured credit card, a credit-builder loan, or both.
- Ask a family member with good credit to add you as an authorized user on their card.
- Some services can report rent and utility payments to the credit bureaus.
- Pay every bill on time and keep card balances low.
- It usually takes about six months of activity to generate a FICO score.
Having no credit isn't the same as bad credit, but it can cause similar problems. Landlords, lenders and even some utilities may ask for bigger deposits or turn you down. Building a credit history from scratch is straightforward, though, and takes about six months to start showing results.
This article is general information, not financial advice.
Ways to start
Secured credit card
You pay a refundable deposit, often a few hundred dollars, which usually becomes your credit limit. You use it like any credit card and pay the bill each month. Many issuers review your account after several months and may return your deposit and upgrade you. See how to choose your first credit card.
Credit-builder loan
Offered by many credit unions and community banks. The loan amount goes into a locked savings account, you make monthly payments, and you get the money at the end. It builds credit and savings at the same time.
Become an authorized user
A family member or partner with good credit adds you to their card. Their account history can appear on your credit report. Make sure they pay on time and keep balances low, since their habits affect you too.
Report rent and bills
Some services and landlords report rent payments to the credit bureaus, and some programs let you add utility and phone payments. These help most with newer scoring models.
Student and starter cards
Some cards are designed for people with no credit and may use your income or bank account history instead of a score.
Habits that build a strong score
- Pay on time, every time. Set up autopay.
- Use a small part of your limit, under 30% and ideally under 10%.
- Pay the full balance each month to avoid interest.
- Don't apply for many accounts at once.
- Keep your first accounts open to build a long history.
How long it takes
- FICO usually needs at least one account that's been open about six months and reported recently.
- VantageScore can sometimes generate a score sooner.
- Good credit generally comes after a year or two of on-time payments and low balances.
Check your progress with free reports; see how to check your credit report for free.
Common questions
You need credit accounts reported to the bureaus, with enough history, to generate a score. Debit cards, cash and most bills don't count unless they're reported. Young adults, new immigrants and people who've always paid cash often have thin or no credit files.
It's a small loan, often from a credit union or community bank, where the money is held in a savings account while you make payments. Once you've paid it off, you get the money. Your on-time payments are reported to the credit bureaus.
Yes. Credit-builder loans, rent and utility reporting, and other installment loans can all build credit. A credit card helps with the utilization part of your score, though, so many people use both.