How to Build a Great Credit Score From Scratch

At some point, everyone has no credit history. We all have to start somewhere, and with good planning and smart decisions, you can get a great credit score. It’s not an exact science — nothing with credit is — but building a great credit score isn’t complicated. Here are the basics.

1. Start Your Credit History

For many people, the first form of credit they acquire is a credit card. As student loan debt grows, it’s also commonly the first trade line to appear on a consumer credit report, because students can get federal student loans without a credit card.

A lot of people start out with secured credit cards, because pretty much anyone can get one. Here’s an expert guide to secured credit cards so you know how to pick one that’s right for you.

2. Pay Your Bills

There are five main factors that influence most credit scores (there are many different models, but most are based on the same things), and the most influential of those factors is your payment history. Whatever sort of credit you have — student loans, a car loan, credit cards — it’s crucial you make payments on time. You can read here about how much a late payment can hurt your credit score.

You should also pay non-credit bills (i.e. utilities, medical bills) on time, because if those go unpaid, they could result in a collection account on your credit report, which will hurt your credit scores for years.

3. Minimize Your Debt

If you have a credit card, use as little of your available credit as possible. The lower your credit card balance is relative to your limit, the better your credit score is likely to be, and even if you pay off your credit card balance every month (a good way to avoid expensive debt), you still want to spend only a small portion of your credit limit each billing cycle. It’s difficult to know when your card issuer will report your account details to the credit bureaus, so some people make payments multiple times within a billing cycle, so whenever the issuer reports the data, the balance is likely to be low.

4. Check Your Credit

The only way to know if you’re on the right track to great credit is to regularly review your progress. Getting your credit reports and credit scores can also help you spot signs of fraud or identity theft, which can really screw up your credit, especially if someone abuses your identity or accounts for a long time. You can check two of your credit scores for free every month on Credit.com to see where you stand. You can also get your free annual credit reports at AnnualCreditReport.com.

5. Be Patient

There’s no way to say for certain that if you do X, Y and Z for a specific amount of time, you will have a certain credit score — there are too many variables in scores (and too many scores out there) to predict that. Still, if you practice the basic concepts of good credit habits, you will eventually build a solid credit history, which your credit scores will reflect. Pay your bills, keep your debt low and apply for credit only when you need it, and you are well on your way to a great credit score. It also helps to keep open your oldest accounts and maintain a mix of accounts (like a credit card and an auto loan, for example), because those play a role in your credit scores, too.