To build credit from scratch, start with a secured credit card or store card, become an authorized user on someone responsible's account, or get a credit-builder loan; also, use services to report rent/utilities or try a student/starter card, always paying on time and keeping balances low to build a strong history.
But if you can't, here are five other ways to establish credit:
No matter your story, or what your reason is for having no credit score, we're here to encourage you: You don't need it. Living without a credit score is truly possible!
But if you have no credit history, you're what's considered "credit invisible". Since there's no single “starting” credit score for everyone's credit, your first credit score depends on your credit activity over at least the first 6 months that you manage a loan or card.
The 2-2-2 credit rule is a guideline for building strong credit, suggesting you should have two active credit accounts (like cards or loans) for at least two years, with consistent on-time payments for those two years, often with a minimum credit limit of $2,000 per account, to demonstrate financial responsibility to lenders, especially for mortgages. It's a benchmark to show you can handle credit well over time, reducing lender risk and improving approval odds for major loans.
Yes, technically, having no credit is better than having bad credit, though both can hold you back. Bad credit shows potential lenders a negative track record of managing credit. Meanwhile, no credit means lenders can't tell how you'll handle repaying debts because you don't have much experience.
Can I Rent an Apartment with a 500 Credit Score? Yes, but you'll likely need additional proof of financial stability, such as a cosigner, guarantor, or larger deposit.
Borrowing from family or friends: Depending on your relationship, you may be able to borrow money from those closest to you. You won't need a credit check, and they may decide not to charge interest. Consider how borrowing money may impact your relationship, especially if you struggle to meet your monthly repayments.
Yes, paying rent can build credit, but only if those payments are reported to the major credit bureaus (Equifax, Experian, TransUnion) through a landlord's system or a third-party rent-reporting service, as rent isn't automatically included in credit reports. Consistent, on-time payments demonstrate financial responsibility, significantly impacting the payment history portion (35%) of your credit score, while late payments can harm it.
The 15/3 credit card payment method is a strategy to potentially boost your credit score by making two payments per billing cycle: one about 15 days before your statement closes (to lower reported utilization) and another around 3 days before the payment due date (to cover the rest and avoid late fees), though its actual impact on credit scoring is debated. It works by keeping your reported balance lower when the card issuer reports to bureaus, but experts note the specific timing isn't magical, and focusing on the reporting date is key.
Disappearing Credit
This can happen if you have paid off your mortgage, buy vehicles with cash, and use a debit card instead of a credit card. Additionally, if you use a credit card in your spouse's name, your partner could have credit related to your card usage, but you may not.
Many scoring systems look at the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, it will probably hurt your score. How long have you had credit? A short credit history may hurt your score, but paying bills on time and having low balances can offset that.
Renting without credit is possible: Landlords often require credit checks, but many will consider alternatives like larger deposits or strong proof of income. Strategies to avoid a credit check: offer a higher security deposit, show stable income, use a co-signer or roommate with good credit, and offer references.
Establishing a credit score can take at least six months, according to credit-scoring company FICO®. VantageScore®, another credit-scoring company, says it produces credit scores even sooner. Timing can change based on many factors.
What's a Good Credit Score for Your Age? Regardless of your age, a “good” FICO Score is anywhere from 670 to 739. If you fall between those numbers — or exceed them — you're on solid footing. That said, many 20-year-olds are just starting to build their credit.
You aren't born with a credit score, so if you have no credit history you also aren't likely to have a credit score. Taking steps to build credit can have long-term positive benefits for your credit score and credit profile.
The four main types of consumer credit are Revolving Credit (credit cards, HELOCs), Installment Credit (mortgages, car loans, student loans), Open Credit (utilities, cell phone bills), and sometimes Charge Cards, which act like credit cards but require full monthly payment, though often these are grouped under revolving or open. These types differ by how you borrow and repay, offering flexibility for daily use (revolving/open) or large, fixed payments over time (installment).
With a 700 credit score (considered "Good"), you're well-positioned to get approved for most major loans like mortgages, auto loans, and personal loans with more competitive interest rates and terms than someone with a lower score, plus you'll qualify for better rewards credit cards and may even see lower insurance premiums. You can access a wide range of financial products, but to get the best rates, scores above 740-760 are often needed.