5 Tips to Build Credit From Scratch

By Miranda Marquit

You know it’s important to pay attention to your credit score.

But what happens when your credit file is “too thin” for someone to accurately assign you a credit score?

If you want to build credit from scratch, you need to make an effort to create a good credit history. The good news is that you can do this. And if you start with the right approach, you can avoid some of the unpleasantness that comes with major credit mistakes that can set you back and cost you money.

Here are 5 tips that can help you build credit from scratch:

1. Use Someone Else’s Account

Do you have a parent willing to add you as an “authorized user” to a credit card account? If so, you can be added to the account and benefit from the good credit of someone else.

Before you do this, though, it’s important to understand that your parent’s credit habits will reflect on you. Make sure your parents pay their bills on time and have good credit habits.

Get added for about a year, be reasonable and pay for anything you charge, and you could get a little extra help as you build credit from scratch.

2. Look for a Student Credit Card

Because of the Credit Card Act of 2009, you need to have a way to pay your credit card if you are under the age of 21 — or you need a co-signer. If you have a job, there is a chance that you could qualify for a student credit card, even without an established credit history. There are some great

There are some great student credit cards that provide you with a way to learn valuable lessons while you build credit from scratch. Make sure you charge only what you can pay off immediately. Pay all your bills on time to avoid negative dings on your report.

3. Apply for a Secured Credit Card

As someone without credit, you might need to apply for a secured credit card. If you can’t get a student credit card, a secured card can be a good option. You need to provide collateral in the form of cash that the issuer keeps in an account. Charge sparingly, pay your bills on time, and after nine months or a year, you should be able to apply for a “regular” unsecured card. Plus, in the meantime, you’ll be building your credit history.

4. Get a Cosigner on an Installment Loan

A credit card is so good when you want to build credit from scratch because your balance and payment history are reported every month. The frequency allows you to quickly build some sort of credit history. However, a credit card is only one type

However, a credit card is only one type of loan. If you can get an installment loan, like a car loan or a personal loan, you can show that you can handle different types of credit. This benefits you in terms of building your credit history and improving your credit score.

You might not be able to get this type of loan without help, though, because of your thin credit file. When I bought my first car for $3,500, my parents cosigned on the loan for me. I was able to make regular payments and build my credit. Combined with my student credit card, it helped me quickly build a credit history from scratch.

5. Practice Good Financial Habits

If you want to maintain your good credit, and keep building a positive credit history, good financial habits are a must. Keep on top of all your bills. Even non-credit bills can make their way to your credit report. Live within your means so you can make on-time payments.

Plan ahead and build an emergency fund so that you don’t end up using your credit cards in a pinch. Staying on top of your money situation is the best way to keep your credit in good shape and avoid financial mishaps that can derail your plans.