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Build Your Credit From Scratch

How to Build Credit From Scratch

Q: I’ve never had a credit card, and my credit history is non-existent. I’m ready to build my credit from scratch. Where do I start?

A: Building a credit history is important, but it also needs to be done right. It may take a while until you see results. But, with time, effort, and responsible financial choices, you can build an excellent credit history, which will positively impact your financial health for years to come.

Here are five steps you can take to get the ball rolling on your credit file.

1. Visit Us

Stop by  Elevate Credit Union to speak to a Loan Specialist about opening your first credit card or  apply online right here. We offer most of our members’ first credit cards even when they don’t have a strong credit history.

2. Open a secured credit card

Secured credit cards are starter cards requiring you to deposit several hundred dollars before you can open a credit line in that same amount. The card issuer will hold this deposit as collateral in case of a missed payment. After eight or 12 months, you will get your deposit back if there is no outstanding balance on your card. You can then close your account and open an unsecured credit card. Secured credit cards are not long-term solutions, but they are great first credit cards since almost anyone can qualify.

3. Open one or two low-balance cards

Just because you are offered a higher limit on a credit card doesn’t mean you should take that higher limit. Try having one or two low-balance cards first. Then use these cards responsibly. After time passes, you can always request a higher limit.

4. Use your cards responsibly

It’s not enough to have credit cards open in your name; you need to use them, too. With a starting balance of $200 or so, you’ll have to be careful to spend just a bit each month and keep your credit utilization at less than 30%. You’ll also have to be vigilant about paying your bill in full and on time each month. You can set up an automatic payment, so you never miss a statement.

5. Become an authorized user

If you have a family member or partner who has an excellent credit score and a credit card that they’ve had for a while, ask them about making you an authorized user on their card. Doing this will add the card’s payment history to your growing credit file and can significantly increase your score. Keep in mind, though, that any time you use the credit, the primary account holder will be responsible for paying the bill. Also, find out whether the card issuer reports authorized user activity to the credit bureaus, so this step makes a difference.

Now you know how to build credit from scratch. Having a credit history is essential. Just make sure you follow these tips, and you will be on the road to excellent credit, which opens so many doors. Elevate Credit Union offers credit builder loans if you need a place to start. We can help you elevate your confidence.