How to Build Credit from Scratch

You have so many financial goals, and you’re ready to get started today- awesome! Let’s do it! There’s just one small problem- you currently have no credit, or poor credit. You need to build credit from scratch, and quickly.

Lacking a credit history can hold you back from achieving a variety of goals, including home ownership, getting a better interest rate on credit cards, etc. Luckily, there are some proven ways that you can build credit fast. You can do this!

While I’ve been building my credit history since college, my husband only just started a few years ago. He emigrated to the US after college, and needed to get credit established quickly so we could achieve our goals. Gaining a solid financial footing in a new place is not always easy, and it takes effort.

Let’s explore the best ways to build your credit quickly:

Secured Credit Cards

When we merged our accounts and created a joint one, the bank offered M. a secured credit card. He didn’t accept right away, as we wanted to do a little more research. He applied for a very basic card from Capitol One, but was declined due to lack of history. It became clear that the secured card from our bank was the best way to start building credit fast.


Cons of the Secured Card

The downside to a secured card is that we had to hand over $300 of our own to fund the account. What this means is that you are basically giving yourself a line of credit, the bank issues the card, and they report on your spending habits to the credit bureaus.

All of the secured cards that we looked into came with an annual fee, too. This is frustrating, because you’re trying to build credit and improve your finances, and you’ve already had to hand over your own money in the process. The annual fee for my husband’s card was $25. Not too bad.

The $300 for the credit line was returned once the bank deemed M. worthy of maintaining an unsecured account. It took less than a year of responsible spending for that to happen.

Since it’s best to keep your spending at or below 30% of your limit, M. went ahead and set up our cell phone payments on his card. That was the only thing that went on it, and we paid it off in full every month. M. used Credit Karma to check his report, and sure enough after just one month he had a credit history starting to build!

Obtaining a Regular Credit Card

After only a few months of using the secured card, offers started arriving for other regular credit cards. M. took a chance and applied for the Discover card, as it offers a cash back bonus Β He was approved instantly, and extended a higher line of credit.

We were very pleased- after just a few months of using the secured card and making payments in full, M.’s credit worthiness was increasing!

Do your research and find a credit card that offers a low interest rate and rewards. There are some great ones to choose from today that offer cash back or travel rewards.

Build credit from scratch with a limited credit history

If you have limited or no credit history, don’t wait to start building it!

Check in with your credit report using a free service- there are many available today. I have used Quizzle, Credit Karma, and Credit Sesame. Everyone should be checking their report throughout the year to ensure that there are no mistakes or fraudulent accounts in their name.

Pay attention to your spending

Once you do get that secured credit card, watch your spending very closely. Don’t max it out, and always make the payments in full on time.

If you can’t afford to pay off your card every month, you could be headed down a dangerous road to dependency on credit. Use the credit card as a tool to establish history, and not as an invitation to buy stuff that you can’t afford.

It takes time and effort to establish finances and to build credit from scratch. Remember, everyone has to start from somewhere! I know, because I’ve experienced it firsthand with my husband.

The most important thing to remember is that you want to show that you’re responsible, so use credit cards carefully and strategically. If you can do this, you should be well on your way to building a strong credit history!

About Lauren

Lauren May is a freelance writer and full-time mom living her best life on a budget.

24 thoughts on “How to Build Credit from Scratch

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  2. I built my credit originally through co signed loans. The interest was far more than $25/year, so I’d say that’s not a bad price to pay! Getting started always sucks, but it sounds like things are moving pretty quickly for him!

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  4. Great tips for people who are trying to build credit out of nothing. I think another good tip is to just get started. The sooner you start, the sooner your history will age, the sooner your credit score will go up and be more established, etc. Best of luck to your husband as he establishes credit!

    1. Thanks DC! You make a great point- we waited for several months, as it just got pushed to the back burner. Definitely should have started right away.

  5. Lauren, it sounds like you guys are on the right path.

    My parents did me an awesome favor by adding me to their CC accounts when I was old enough to drive and add gas to the car. This helped me to establish 5-6 years of credit before graduating college.

    From there, I took out a loan to purchase a used car (even though we could pay cash for it) just to build credit. I paid it off after a couple months. This helped establish even more credit history.

    Good luck!

    1. That’s great Derek! I didn’t know that being added to accounts helped build credit. I’ll have to keep that in mind when my daughter gets older. I’d love to help her out in that way.

  6. I am surprised Capital One declined him. I applied for my first credit card with them and was approved at 18. I’m glad Discover came through! The secured card sounds like a bit of a hassle, but at least it worked out.

  7. When we were first married about 4 years ago, I was a student and my husband had landed his first job. We opened up our first credit card together. The bank gave us a limit of $500. Took a few years to really build up that credit together. We were also dealing with him becoming a permanent resident. Not easy stuff.

    1. I know what you mean- it’s a tough road getting settled as a permanent resident! The last thing my husband has to do now is get his state driver’s license and we will finally be done with the to-do list, as far as that goes.

  8. I had a similar experience when we moved to Canada from the U.S. Credit histories don’t cross international borders! Though I had lots of money on deposit at a local bank and even owned shares of the bank’s stock, it refused to issue a credit card with a $5,000 limit. After a threatening letter to the branch manager, the bank relented. πŸ™‚

  9. Glad to hear that M was able to get an unsecured card after some time with the secured card. It’s a shame that many times you need to go through with the secured option to get started building credit as most of them just aren’t that good at all.

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