National Credit Education Month: 5 Tips on How to Build Your Credit Score From Scratch

National Credit Education Month: 5 Tips on How to Build Your Credit Score From Scratch

If you don’t have much experience with credit, the idea of learning how to build up a credit score from scratch can seem intimidating. However, it doesn’t have to be that way. By following a few simple tips, you can put yourself on the path to having an excellent score in no time flat. Keep reading to learn more.

Here are 5 tips to help you build your credit score from the ground up

1. Start with a secured credit card or by becoming an authorized user.

If you don’t have much credit history, you might have trouble getting approved for a traditional credit card. However, fortunately, there are other ways to build up your credit file. To start, if you are close to someone who has good credit, such as a parent or a spouse, you may want to ask about being added as an authorized user on one of their cards.

Authorized users can benefit from the positive account history of the main cardholder. As the name suggests, being added to the card means that they are authorized to use it for purchases, but are ultimately not responsible for payment. In fact, even if the primary cardholder asks you not to use their card for purchases, being added to it can still positively impact your credit history.

If becoming an authorized user is not an option, your best bet is to get a secured credit card. Secured credit cards are easier to qualify for than traditional credit cards because they are funded by a deposit that is made when the card is first opened. The deposits are usually refundable, but credit card issuers each have their own policies about the deposits and how they can be used.

2. Make your payment on time every month.

No matter what type of card you have in your name, it is crucial to make your payments on time. After all, payment history accounts for 35% of your overall credit score, making it the weightiest category of them all. Unfortunately, once a payment is 30 days late, it gets reported to the credit bureaus and can hurt your score.

If you’re having trouble staying on top of your payments, consider setting up automatic payments. Automatic payments will help ensure that your payment history stays intact. With that said, you’ll also need to make a point of staying on top of your current balance so that you don’t accidentally overdraw your account when the payment is made.

3. Pay off as much as you can.

One mistake that new cardholders often make is allowing big balances to pile up on their revolving lines of credit. Ultimately, doing so can hurt your credit utilization ratio, which accounts for around 30% of your overall credit score. Your credit utilization ratio measures how much credit you’re using versus how much is available to you. Ideally, you want this ratio to stay below 10%.

Paying off as much of your credit card balance as possible is the key to keeping your credit utilization ratio and good shape. While the minimum payment is all that’s required of you, it’s best to try and pay your balance off in full every month. If you can’t pay it off in full, put as much of your disposable income toward it as you can.

4. Limit how often you open new accounts.

While opening new accounts is part of building your credit history, you’re going to want to limit how many accounts you apply for at one time. Believe it or not, each time you apply to open a new credit card it generates a hard inquiry on your account and may ding your score. While one application should not hurt it significantly, applying for multiple cards at one time can have a compounding effect and will have a greater negative impact on your overall credit score.

In addition, opening new accounts will also shorten the average age of your accounts, which can also have a negative impact on your score.

5. Monitor your credit report for errors.

Lastly, make an effort to monitor your credit reports. Every borrower is entitled to one free credit report per year from each of the credit bureaus. You can access it by going to

Once you have your credit reports in hand, be sure to check them for any errors. If you do find an error, contact the reporting bureau in writing. They will have 30 days to respond to you about the error and can help you get it resolved.

The bottom line on how to build your credit score

Starting to use credit can be scary. However, if you follow the advice above, you should be able to set yourself on a good path toward building an excellent credit score. Truthfully, improving your score does take a little bit of time and patience. Still, if you’re willing to put in the effort, you can build a score in time that will make it much easier to take other financial steps later on down the road.

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