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How to Build Credit from Scratch: A Beginner’s Guide

hamed mousa

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How to Build Credit from Scratch: A Beginner’s Guide

Building credit from scratch can be a daunting task, but it’s an essential part of achieving financial independence. Good credit is necessary for many things in life, from getting approved for loans and credit cards to renting an apartment or buying a car. In this beginner’s guide, we’ll take you through the steps to build credit from scratch, no matter where you’re starting from.

How to Build Credit from Scratch A Beginner's Guide

Understanding Credit Scores

The first step to building credit is to understand what credit scores are and how they work. Your credit score is a number that represents your creditworthiness, based on your credit history. The most common credit score is the FICO score, which ranges from 300 to 850. The higher your score, the better your credit.

There are five factors that affect your credit score:

  • Payment history: Your track record of paying bills on time
  • Credit utilization: How much of your available credit you’re using
  • Length of credit history: How long you’ve had credit accounts open
  • Credit mix: The types of credit accounts you have (e.g., credit cards, loans, etc.)
  • New credit: How often you’re applying for new credit

It’s important to understand these factors, as they’ll play a big role in how you go about building credit.

Step 1: Get a Credit Report

The first step in building credit is to get a copy of your credit report. Your credit report is a detailed history of your credit accounts and payment history. You can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year at AnnualCreditReport.com.

Reviewing your credit report is important, as it can help you identify any errors or issues that might be hurting your credit score. If you find any errors, you can dispute them with the credit bureau to have them corrected.

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Step 2: Open a Credit Account

If you’re starting from scratch with no credit history, the easiest way to start building credit is to open a credit account. There are a few options for credit accounts, but the two most common are credit cards and secured credit cards.

Credit Cards

Credit cards are one of the most common ways to build credit. There are a variety of credit cards available, including cards for people with limited or no credit history. When choosing a credit card, look for one with no annual fee and a low interest rate. You might also want to consider a card that offers rewards, such as cash back or travel points.

When you use a credit card, make sure to pay your bill on time and in full each month. This will help you establish a good payment history and avoid interest charges.

Secured Credit Cards

If you’re unable to get approved for a traditional credit card, a secured credit card might be a good option. With a secured credit card, you’ll need to put down a deposit, which will serve as your credit limit. The deposit reduces the risk for the lender, making it easier to get approved for the card.

Just like with a traditional credit card, make sure to pay your bill on time and in full each month with a secured credit card to establish a good payment history and avoid interest charges. After a period of responsible use, you may be able to upgrade to an unsecured credit card and get your deposit back.

Step 3: Become an Authorized User

If you’re not able to get approved for your own credit account, another option is to become an authorized user on someone else’s credit account. This could be a family member, spouse, or close friend who has good credit and is willing to add you to their account. As an authorized user, you’ll be able to use the account and build credit in your own name.

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It’s important to choose the right person to become an authorized user with. You want to make sure that the person has good credit habits and will continue to make payments on time. If they don’t, it could hurt your credit instead of helping it.

Step 4: Make Payments on Time

One of the most important factors in building credit is making payments on time. Late payments can have a significant negative impact on your credit score and can stay on your credit report for up to seven years. Always make sure to pay at least the minimum amount due by the due date to avoid late fees and negative marks on your credit report.

If you’re having trouble making payments, reach out to your lender or creditor. They may be able to work out a payment plan or offer temporary relief to help you get back on track.

Step 5: Keep Your Credit Utilization Low

Your credit utilization is the amount of credit you’re using compared to your credit limit. For example, if you have a credit card with a $1,000 limit and you’ve charged $500 to it, your credit utilization is 50%. Keeping your credit utilization low is important for building good credit. Aim to keep your credit utilization below 30% to avoid negatively impacting your credit score.

One way to keep your credit utilization low is to make multiple payments throughout the month instead of waiting until the due date to pay your bill. This can help keep your balance low and your credit utilization in check.

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Step 6: Monitor Your Credit

It’s important to monitor your credit regularly to make sure there are no errors or issues that could be hurting your credit score. You can monitor your credit by checking your credit report regularly and signing up for a credit monitoring service.

Some credit monitoring services are free, while others require a monthly fee. Look for a service that offers regular credit score updates, alerts for changes to your credit report, and identity theft protection.


Building credit from scratch can seem daunting, but it’s important to establish good credit habits early on. By following these steps and staying on top of your credit, you can build a strong credit history and improve your chances of being approved for credit in the future. Remember to always pay your bills on time, keep your credit utilization low, and monitor your credit regularly to stay on track.

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