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How to Build Credit From Scratch

One of the most important things you can do when buying a home is establishing good credit history. The higher your credit score, the more loan programs available and the lower the interest rate. Whether you’re just starting out, or would like to improve your credit score, here is a step-by-step guide on how to build credit from scratch.

Get a Starter Credit Card

Signing up for a starter credit card is one of the most common steps to build credit from scratch. Secured credit cards like student credit cards or retail credit cards with low available credit limits are great ways to get in the habit of paying back a balance. Cards that don’t have annual fees, charge interest, or require you to carry a balance are great options for starter credit cards.

Become an Authorized User

As an authorized user on someone else’s credit card, all activity on the account may be reported on your credit report, helping you establish credit history. Make sure to find someone you trust, like a parent or sibling, since a late/missed payment on the account holder’s part will result in a credit late for you as well.

Add Alternative Credit Sources

Alternative credit sources (or alternative tradelines) are great ways to build credit if you’re just getting started. Alternative credit refers to information that isn’t typically found on credit reports such as utilities, rent, or cell phone payments. Since these payments are all typically hundreds of dollars a month, it can show the lender that you have a history of paying on time. Might as well take advantage of the on-time payments you're already making!

Practice Good Credit Habits

Building a solid payment history, making on time payments, using a small portion of your available credit, opening only one account at a time, and keeping your accounts open are all great ways to practice good credit habits. You can read all about the categories that make up a credit score, including the weight they hold in your final score, at What Makes Up Your Credit Score?

Check Your Score

Like any habit, the best way to improve is to know where you stand. Request your credit report and check for errors and discrepancies. Every year you are entitled to a free report (that doesn’t ding your credit score) at You’d be surprised at how many people have discrepancies on their report that they didn’t even know about! The sooner you confirm all the information is correct on your credit report, the faster the loan process can proceed, since you wont’ have to correct your credit report along the way.


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