Building Credit From Scratch

When you're getting ready to buy a home, your credit score plays a major role in your mortgage loan approval. Lenders look at several factors – like your debt-to-income ratio (DTI)The percentage of your gross monthly income that is used to pay your monthly debt and determines your borrowing risk.debt-to-income ratio (DTI)The percentage of your gross monthly income that is used to pay your monthly debt and determines your borrowing risk., employment history, and savings – but your credit history is one of the most important. And that’s summed up in your credit score. 

What Makes Up Your Credit Score? 

Your FICO® score, used in around 90% of lending decisions, is calculated based on several key factors. Although there are different scoring models out there, FICO remains the gold standard for most lenders, including mortgage lenders. 

Here's the breakdown of what goes into your FICO® score: 

• 35% Payment History – Have you paid past credit accounts on time? 

• 30% Amounts Owed – How much of your available credit are you using? 

• 15% Length of Credit History – How long have your credit accounts been active? 

• 10% New Credit – How often do you apply for new accounts? 

• 10% Credit Mix – Do you have a variety of credit types, like credit cards, auto loans, or student loans? 

Your credit score typically ranges from 300 to 850, and the higher your score, the more favorably lenders view your “financial responsibility.” 

Expert Tip

The score you see online may not be the same one your mortgage lender pulls. Different lenders and industries use different scoring models, so it’s good to know where you stand – but expect a little variation.

What If You Don’t Have Any Credit? 

If you’ve never had a credit card, loan, or other accounts in your name, you might not have a credit score at all. To generate a FICO® score of your own, you typically need: 

• At least one credit account open for six months or more, and 

• At least one account reported to a credit bureau in the past six months. 

Having no credit history doesn’t mean you’ve done anything wrong, either. It just means you haven’t started building it yet. The good news? There are a few smart, beginner-friendly ways to get started.  

Best Ways to Start Building Credit 

When you’re ready to start building, you can: 

1. Apply for a Secured Credit Card 

A secured credit card is a great first step. You make a refundable deposit upfront, which becomes your credit limit. Then, use the card to make small purchases and pay it off on time. Your activity gets reported to credit bureaus and starts building your credit history. 

For example, if you deposit $500, that becomes your spending limit. Make a few purchases each month and pay them off in full – it's seriously that easy to get positive momentum going.  

2. Apply for a Credit-Builder Loan  

This type of loan holds your borrowed funds in a secured account while you make monthly payments. Once the loan is paid off, you receive the money – and a positive payment history is reported to the credit bureaus. 

3. Get a Co-Signer or Become an Authorized User 

If a family member or trusted friend has good credit, they can actually help you start yours. 

• Co-signers share responsibility for the loan, helping you get approved even if you don’t have credit history yet. 

• Authorized users are added to another person’s credit card. You can use the card (with their permission), and their payment history appears on your credit report. 

Expert Tip

Just make sure the person you partner with has a strong payment history – because missed payments will impact both of your credit scores.

How to Create and Maintain Good Credit Habits 

Once you start building credit, you’ll want to keep it growing. These good habits will only help improve your score over time: 

Pay Bills on Time, Every Time 

Payment history is the single biggest factor in our credit scores. Even one late payment can make a significant, and lasting, impact. Set reminders, enable autopay, or use calendar alerts — whatever it takes to avoid missing those due dates. 

Give Special Attention to Credit Utilization  

Credit utilization refers to how much of your available credit you’re using. 

A good rule of thumb: keep it under 30%. So, if you have a credit card with a $1,000 limit, aim to keep your balance below $300. But like a good game of limbo, lower is even better. 

Make Small Purchases and Pay Them Off Quickly 

Using your card regularly (and responsibly) shows lenders that you can manage credit. Make small purchases you’d already be making – like gas or groceries –and pay them off in full each month. It'll build trust with lenders and positively impact your credit score. 

How Long Does It Take to Build Credit? 

Building credit takes a lot of patience and a lot of consistency. 

With smart habits in place, it's possible (but not a guarantee) to start seeing a credit score in as little as three to six months. From there, the longer your credit accounts stay open and in good standing, the stronger your credit profile becomes. 

Your score won't jump overnight, but every on-time payment and low balance brings you closer to excellent credit. 

How To Check Your Credit Score and Report 

Keeping tabs on your credit is always a good idea – and most importantly – it’s free! Here’s how to stay in the know: 

• AnnualCreditReport.com offers a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year. 

• Many banks and credit card companies – including the ones you’re already using – also offer free credit score monitoring as part of your account. 

Checking your own credit does not impact your score, unlike a hard credit inquiry. In fact, it’s a smart habit to catch any errors or signs of fraud early. 

Yes, You CAN Build Credit from Scratch 

Don’t let a lack of credit hold you back anymore. Whether you're looking to buy a home, get a car, or open a new credit card, it all starts with those first few steps mentioned above. 

Start small, stay consistent, and keep those good credit habits going. Before you know it, you’ll have a solid credit score that opens doors to better loan terms, lower interest rates, and more financial freedom.