How to Build Credit History From Scratch

How to Build Credit History From Scratch

Posted on March 3, 2023

If you have just left home, school or college you are going to quickly come up against a seemingly insurmountable issue. The need for a credit score when you haven’t yet built one.

We say ‘seemingly’ insurmountable because that’s all it is. All problems have solutions if you look hard enough. Including the problem of needing credit but not having a credit history and not being able to generate a credit history without being able to access credit.

Here's how to build credit from scratch:

Credit Builder Credit Card

You can still access certain types of credit without a credit history. One such tool is the credit builder credit card. These are often used by people with bad credit to help rebuild. They can also be used by people with no credit history to build credit.

If you’re over 18, you can apply for a credit builder credit car which can begin helping right away.

There are three rules for using one of these cards though:

1. Be disciplined – Don’t use up all your credit limit right away. The idea is to build a credit history, not get yourself into financial trouble immediately.
2. Pay off your balance in full each month – Credit builder cards are expensive. They work with higher risk borrowers but charge higher rates to offset that risk. Paying off your card in full each month will avoid those high rates.
3. Set up automatic payments – Setting up automatic payments for the minimum amount each month ensures you will never miss a payment. You can then make a separate payment to settle the balance each month.

As long as you stick to those three rules, using a credit builder credit card is a viable way to being building a credit history.

Other Ways to Build Credit From Scratch

There are two other easy ways to build a credit history from nothing. Get a cell phone contract in your own name and make sure your landlord or leasing company adds a note to your credit report.

Both will be minor but useful additions to your credit card in helping build a solid credit history.

Credit Histories & You

A credit history is just that, a history of how you have dealt with credit. They aren’t built overnight and will take weeks and months to begin growing. Once you have 3-6 months’ worth of payments, your credit score should slowly begin to increase.

You can then keep it going as it is or use a car loan to help speed things up. Either way, as long as you make your payments on time, every time, your journey to financial independence is underway!

When you’re ready for a car loan, get in touch with the car loan experts at Northway Ford for great deals on auto finance.