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You may have heard the saying, 'to get credit, you need to have credit' — which can be pretty frustrating as a credit newbie.
Most milestones in life, such as buying a house or leasing a car, require credit history, but if your credit score is low (or nonexistent), you will likely find it hard to get approved or you may face higher interest rates. The majority of credit cards also require some sort of credit history in order to qualify, with only a handful of cards made for people with no credit.
One of the quickest and easiest ways to build credit is by becoming an authorized user on a family member's or friend's credit card. As an authorized user, you can piggyback off the primary account holder's credit and as a result, establish your own credit history. Authorized users also have zero liability, so this is a low-risk way to build credit. Plus, you might even get some special perks as an authorized user, such as airport lounge access.
But before you become an authorized user, make sure your family member or friend has good credit and uses their credit card responsibly. You don't want to become an authorized user on an account that has debt or late payment history, since those negative actions will appear on your credit history and counteract any credit building you plan on achieving.
Also, make sure you practice responsible behavior as well. You'll want to make a clear plan for how you'll pay back any purchases you make with the card, so you don't risk wracking up debt on someone else's card.
Secured credit cards are a great way to build credit if you have none. These cards are typically easier to qualify for if your credit history is poor or non-existent. And you can use a secured card just like a traditional (aka unsecured) credit card to help you establish good credit, as long as you practice responsible credit behavior.
A secured card is nearly identical to an unsecured card in that you receive a credit limit, can incur interest charges and may even earn rewards. The main difference is you're required to make a security deposit in order to receive a line of credit. The amount you deposit typically starts at $200 (though it can start as low as $49) and often becomes your credit limit. So if you make a $200 security deposit, you'll receive a $200 credit limit.
The Discover it® Secured Credit Card tops our list of the best secured credit cards by offering cardholders cash back, a generous welcome bonus and no added fees on purchases outside the U.S. — all for no annual fee. Starting seven months from account opening, Discover will automatically review your account to see if they can transition you to an unsecured line of credit and return your deposit.
Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
Discover will match all the cash back you've earned at the end of your first year
N/A on purchases
Balance transfer fee
3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*
Foreign transaction fee
New / Rebuilding
*See rates and fees, terms apply.
If you want to start building credit without a credit card, there are some alternatives. A number of financial institutions offer credit-building tools, but they may charge a monthly fee. However, Experian provides a free and easy-to-use tool: *Experian Boost™.
This service lets you get credit for paying monthly utility, cell phone and streaming service bills on time, which has the potential to boost your credit scores. Qualifying streaming payments currently include Netflix®, HBO™, Hulu™, Disney+™ and Starz.
Simply connect the bank account(s) you use to pay your utility and cell phone bills, verify the data and confirm you want it added to your Experian credit file. You'll get an updated FICO® Score instantly and also receive a free copy of your Experian credit report. Learn more about how Experian Boost works.
Average credit score increase
13 points, though results vary
Credit report affected
Credit scoring model used
Results will vary. See website for details.
Payment history is the most significant factor in your credit score, representing 35% of your score. As you make payments on a credit builder loan, you establish healthy payment habits that help build a good credit score over time.
A credit builder loan is designed to help you build credit as you make loan payments, and it is easy to qualify for, making it attractive to borrowers with little to no credit history.
These loans work differently than a typical loan: your lender deposits the amount of the loan (usually $300 to $1,000 according to the Consumer Financial Protection Bureau) into a savings or CD account that you can't access until your loan is repaid. Thus, it's easier to get approved for these kinds of loans since they aren't as risky as a normal loan. After paying off your loan, you receive the money and, sometimes, a portion of the interest you paid back. You usually have between six and 24 months to pay off this type of loan.
However, as with any other loan, late or missing payments on a credit builder loan will hurt your credit score so don't take out a credit builder loan if you believe that you'll have a hard time paying it back on time.
Credit utilization is the percentage of the total credit you use. For example, if your credit limit is $10,000 and your balance is $2,000, then your credit utilization rate is 20% ($2,000/$10,000 = 0.2 x 100 = 20%). Most experts recommend that you maintain a credit utilization below 30%, and most consumers with excellent credit scores have credit utilizations below 10%.
So if you've opened up your first credit card, it's beneficial to keep in mind that holding your credit utilization low is a healthy financial practice and suggests to lenders that you are not a risky borrower. Your credit utilization rate is the second-most important factor in determining your credit score. To build your credit score, you should try to use as little of your credit limit as low as possible, though it's not necessary to aim for a credit utilization as low as 0%.
Aside from lowering your overall spending, you can lower your credit card utilization by opening multiple credit cards and increasing your total credit limit.
You don't need to needlessly make large purchases and immediately pay them off to increase your credit score. It may seem counterintuitive to use your credit card on small purchases, but if you're building credit from scratch and are on a tight budget, this could be an effective approach to get some momentum on your card — just be sure to make payments on time. Credit bureaus look favorably upon on-time and ahead-of-time payments, even if those payments are for relatively small balances.
Every person's credit journey is unique so there's no hard-and-fast rule about how long it will take to build credit. The major credit scoring models generally require two to six months of credit activity to generate a credit score. However, if you're starting from scratch, it may take a bit longer to actually achieve a good credit score.
The minimum age to establish a credit score is generally 18 since that's the minimum age to open a credit card. That said, it's possible for minors to start building credit before that age by being authorized users on someone else's credit card.
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There's no one credit score that everyone starts out with. Although 300 is the lowest possible FICO® score, most people will start higher.
Here are some free credit score resources that you can access even if you don't have a credit card yet:
If you have no credit history, consider the following approaches to building credit:
- Become an authorized user on a family member's or friend's card
- Apply for a secured credit card, typically the easiest type of credit card to qualify for
- Use a tool like *Experian Boost™ to get credit for paying some monthly bills on time
- Consider taking out a credit builder loan, typically the easiest type of loan to qualify for
- When you do open your first credit card, keep your credit utilization under 30%
- Pay off small purchases on your credit card quickly
It can seem daunting at first to start building credit with no credit history, but it can be done with a few simple steps. Consider establishing credit with one of the best credit cards for building credit.
For rates and fees of the Discover it® Secured Credit Card, click here.
*Results will vary. Not all payments are boost-eligible. Some users may not receive an improved score or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.