Build Up Your Credit from Scratch
Q: I’ve never had a credit card and my credit history is non-existent. I’m ready to build up my credit from scratch. Where do I start?
A: Building a credit history from the bottom up can be tricky business. 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 a few steps you can take to get the ball rolling on your credit file.
Stop by to speak to an MSR about opening your first credit card right here. We offer many of our members introductory credit cards even when they don’t have a substantial credit history.
2. Open a secured credit card
Secured credit cards are starter cards requiring you to make a deposit of 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. 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 bill.
4. 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. 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 card, 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 isn’t wasted.
Your Turn: How did you build your credit file? Tell us about it in the comments.