How to Build Your Credit Score from Scratch
Simple Strategies to Build Your Credit Score from Scratch
Building a credit score from scratch might seem daunting, but it's actually straightforward if you follow the right steps.
In this guide, we’ll cover how to start building your credit and maintaining it efficiently.
Start with One Credit Card
When you're beginning to build your credit score, start with one credit card. Steer clear of store cards like Macy's, Dillard's, or Victoria's Secret. Instead, opt for a Mastercard or Visa.
Choose Realistically
It's tempting to apply for the best travel or rewards cards, such as the Chase Sapphire Reserve. However, these are for people with excellent credit scores. Applying for these when you’re just starting out will likely result in rejections. Instead, focus on cards meant for beginners. Websites like NerdWallet can match you with suitable options.
Common starter cards:
- Discover Card
- Capital One
Avoid Overapplying
Avoid applying for multiple credit cards at once. Each application triggers a credit inquiry, which can hurt your credit score.
Apply strategically. If you get turned down, move on to the next option.
Secured vs. Unsecured Cards
While secured credit cards are an option, many beginners can get unsecured credit cards through companies like Discover or Capital One.
Research your options and choose wisely.
Don’t Fear High Interest Rates
Yes, starting interest rates can be high, even over 20%. But the objective here is not to get into debt. Your goal is to build a credit history and a strong credit score.
Make Small Charges and Pay Them Off
Once you have your credit card, make small charges each month – like $50 if you have a $200 limit. Here's the kicker: pay it off in full every month.
- Charge on Monday, Pay by Friday: This habit helps you stay disciplined.
- Set Up Auto-Pay: Schedule auto-pay 5 days before the due date to avoid the risk of missing a payment.
Avoid Common Pitfalls
Some believe you need to carry a balance to build credit, but that’s not true. Paying off your credit card in full each month is more effective and prevents you from paying high interest rates.
Open More Cards Gradually
After six months with your first card, consider opening a second one. Use it the same way: make small charges and pay them off in full each month. Eventually, aim for three credit cards. Each new card should be opened six months apart.
Focus on Good Credit Habits
- Avoid Balances: Zero-balance transfers often come with fees. Don’t carry a balance.
- No Need for Multiple Cards: Three well-managed credit cards are enough for a solid credit score.
Bottom Line
Building a credit score is about showing a history of responsible repayment. Remember, the goal isn’t to rack up debt but to prove you can handle borrowed money wisely. By following these steps, you’ll establish and maintain a strong credit score, helping you secure better interest rates for major purchases in the future. Stay disciplined, make small charges, and always pay off your balances. Your credit score will thank you.
Jennifer Beeston
SVP Mortgage Lending @ Guaranteed Rate
Phone: 786-933-2077
About The Author:
Jennifer Beeston is a nationally known mortgage originator who is known for her ability to make the mortgage process easy to understand and zero stress. Featured in articles by US News, Business Insider, TIME, NBC news and countless others, Jennifer is a vocal advocate for mortgage transparency and consumer empowerment. You can find her on Youtube where she has created a library of mortgage education so that everyone can understand mortgages and obtain the dream of home ownership. Her passion is empowering and educating Americans and helping them get HOME. She is ranked as the #1 VA Loan Officer in America and is licensed in 48 states to do mortgages. She has been a top 1% lender since 2016 and offers VA, Conventional, FHA and Jumbo mortgages. She is also the author of Brainhacked, which is a modern guide for saving and protecting your money in a tech based world.
Licensing:
Jennifer Beeston NMLS ID: 247743; MS - 247743, MT - 247743, NC - I-189119, ND - NDMLO247743, NE - Licensed, NH - Licensed, AK - AK247743, AL - 72998, AR - Licensed, AZ - 1007541, NJ - Licensed, NM - Licensed, NV - 66544, NY - Licensed, OH - MLO-OH.247743, CA - CA-DOC247743, CO - 100516570, OK - MLO20600, OR - 247743, PA - 91992, SC - MLO - 247743, CT - LO-247743, DC - MLO247743, DE - MLO-247743, FL - LO66900, SD - MLO.08498, TN - 205478, TX - Licensed, GA - 70357, HI - HI-247743, VA - MLO-40552VA, VT - VT247743, WA - MLO-247743, IA - 33839, ID - MLO-2080247743, IL - 031.0054184, WI - 247743, WV - LO-247743, WY - 8203, IN - 41478, KS - LO.0039219, KY - MC717200, LA - Licensed, MA - MLO247743, MD - 247743, ME - Licensed, MI - 247743, MN - MN-MLO-247743, MO - MO-247743
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