Where your credit score begins & how to build it

Building your credit from scratch can be a catch-22. It can be hard to get approved for any financial product if you don’t have a credit history — and yet, you need to have used financial products to build one. Thankfully, there are things you can do to avoid this vicious cycle and build your credit from scratch.

What is a credit score?

A credit score is a three-digit number that shows how likely you are to repay borrowed money. It’s based on:

• Payment history (35%) – Whether you pay your bills on time.
• Credit utilization (30%) – How much of your available credit you’re using.
• Length of credit history (15%) – How long your accounts have been open.
• Credit mix (10%) – Types of credit accounts, like credit cards, loans, and mortgages.
• New credit (10%) – Recent credit inquiries and newly opened accounts.

Lenders use your credit score to decide if they should approve you for loans or credit cards and what interest rates to offer.

Where does your credit score start?

When you first begin building credit, you might assume everyone starts with a perfect score of 850 or a blank slate of zero—but that’s not exactly how it works. Your credit score doesn’t technically “start” until there’s enough information in your credit history for the credit bureaus to calculate one.

If you’ve never had a loan, credit card, or any account reported to the credit bureaus, you’re considered “credit invisible.” That means there isn’t enough data for the system to generate a score. About 26 million adults in the U.S. fall into this category, according to the Consumer Financial Protection Bureau (CFPB).

Once you open your first credit account—like a secured credit card, student loan, or authorized user account—and it’s been reported to the bureaus for a few months, your credit score can be calculated. Most scoring models (like FICO and VantageScore) require at least one account that’s been active for three to six months to generate a score.

Your starting score depends entirely on how you use your first credit accounts. Someone who makes on-time payments and keeps balances low could see an initial score in the high 600s or low 700s, while someone who misses payments early on might start in the 500s. It’s not a fixed number—your first score reflects your financial habits from day one.

How to establish a credit score

Rather than thinking about where your credit score “starts,” it’s more accurate to think about how it’s built. Every payment, balance, and credit decision you make in the first few months lays the foundation for your long-term credit health.

Apply for a secured credit card

If your credit score isn’t high enough for a traditional credit card, a secured credit card is a great place to start. Secured cards are backed by a cash deposit, which usually becomes your credit limit. These deposits are refundable when you close the account.

Other than the upfront deposit, a secured card works like any regular credit card. You can use it for purchases, and you’re responsible for paying the balance and any interest. The key purpose of a secured card is to demonstrate responsible credit use, so it’s important to pay your balance in full and on time each month.

When choosing a secured card, look for low or no annual fees and competitive interest rates. Make sure the card reports to all three major credit bureaus — Equifax, Experian, and TransUnion — so your responsible use is reflected on your credit report. You can check each card issuer’s reporting policies online or by calling them directly.

Get a credit-builder loan

A credit-builder loan is another tool to establish or improve your credit score. Unlike traditional loans, with a credit-builder loan, the borrowed amount is held in a savings account while you make payments. Loan amounts usually range from $300 to $1,000, and repayment typically lasts 6 to 24 months.

As you make payments — including interest — the lender reports your positive credit habits to all three credit bureaus, helping build your credit history. Once the loan is fully repaid, you can access the funds in the savings account. When selecting a credit-builder loan, look for low fees and confirmation that the lender reports to all three bureaus.

Become an authorized user

Asking a responsible close friend or family member to add you as an authorized user on their credit card account can significantly help your credit. As an authorized user, all activity on the card — credit balance, limit, and payment history — is reported on your credit report. Doing so can decrease the time it takes to build credit from scratch.

However, be aware that if the primary cardholder misses a payment, this will also appear on your credit report. Additionally, if the account has a high utilization rate, it can hurt your credit score.

Once you are no longer an authorized user, the account's history will be removed from your credit report. Therefore, it's beneficial to use this time to achieve a credit score that will allow you to apply for your credit card.

Becoming an authorized user isn't necessarily a surefire way to improve your credit. Credit bureaus have begun to recognize this as a credit improvement tactic and may choose to avoid acknowledging it on your credit history.

Get credit for utility and rent payments

When the only bills you pay are your phone, utility, and rent payments — and you’re making them on time, without fail — you can leverage that diligence right onto your credit report.

Through rent-reporting services like Rental Kharma, Bilt, and LevelCredit, you can add rent payments to your credit report to build a healthy credit score. However, be aware that each company has different fees and reporting practices. For example, Rental Kharma charges an enrollment fee and a monthly fee and currently reports to TransUnion; they are in the final stages of adding Equifax. LevelCredit requires a monthly fee and reports to all three credit bureaus.

For utility and telecom bills, Experian Boost offers a free opt-in service that scans your bank account for utility payments, then allows you to choose the bills that get reported to Experian.

How to maintain healthy credit

After working hard to build a healthy credit score, you can move into the maintenance phase of your financial wellness plan. Maintain solid credit with these tips for building and keeping a good credit score:

• ‍Make your payments on time. Getting into the habit of paying your bills on time will serve you well since payment history is one of the most critical factors on your credit report.
• ‍Limit your credit usage. Keep your balances low and your credit utilization ratio under 30%. Most lenders see a utilization ratio of 30% or less as an indicator that the borrower is responsible. You can calculate your credit utilization rate by adding your credit balances and dividing the sum by your total credit limit.
• ‍Limit applications. Apply for financial products only when necessary, and always prequalify first when possible. Making multiple credit card and loan applications results in hard inquiries on your credit report, which can stay on your credit report for two years.
• ‍Check your credit score and report regularly. This helps you track your financial health, spot errors, and catch potential identity theft early.

Where to get your free credit report

Federal law states that the three national credit reporting agencies, Equifax, Experian, and TransUnion, must provide you with your credit report for free. Under the Fair Credit Reporting Act (FRCA), you are entitled to receive your report once annually upon your request. You can get your free credit report from annualcreditreport.com.

When you go to annualcreditreport.com, you can request your reports from one, two, or all three credit reporting agencies simultaneously. You can order them online, over the phone, or mail. You will need to provide your name, address, Social Security number, and date of birth, and you may have to verify if you have lived at a different address in the last two years. They may also ask you for information only you would know to safeguard your data.

Final thoughts

Building a healthy credit score with a limited history may seem challenging, but there are plenty of ways to prove your creditworthiness. Taking a few straightforward steps is the fastest way to improve your credit health and set you on a path to success.

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