How to Build Your Credit From Scratch

March 8th, 2021 by
Build credit from scratch

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Having to build your credit from scratch may seem like a daunting task at first.

Good credit is one thing that you will need for your financial future and any will help with buying a car, home, or other major purchases.

Related: How to Stay Organized with Your Finances

With a little work, you can increase your credit score and improve your finances for the future. TransUnion gives some tips on how to build your credit.

Taking out a Secured Credit Card

One way to start building credit is through a secured credit card. These cards are good for people with low or damaged credit. When you pay your balance, the card issuer informs the credit bureaus and this will increase your score.

They do require you to pay a deposit before getting the card itself. The deposit is normally the same amount as the credit limit and generally is returned at a later date or when the account is closed, depending on the card issuer. If you were not to keep up with monthly payments, the deposit would be used to pay the debt instead.

Lower your Credit Utilization

With any lender, they will look at your credit utilization. This is how much you are spending on your cards.

Ideal credit utilization is under 20% of the total credit limit. If your limit is $500, your ideal credit utilization would be $100 outstanding. Having a lower credit utilization can increase your overall credit score.

Related: How to Find a Financial Advisor

Pay Your Bills on Time

When you receive a bill, pay it on time. Failed payments can have a negative effect on any hard work that you have previously done to increase your credit score.

Late payments can stay on your credit report for up to seven years and future lenders will be able to view them when you are looking at borrowing or applying for new cards.


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