How to Start Building Credit from Scratch

Building credit is an essential step in establishing your financial foundation, especially if you’re starting with no credit history. A good credit history opens doors to opportunities like renting an apartment, getting a loan, or qualifying for better credit cards—all of which can support your broader financial goals, such as saving or investing. But how do you build credit from scratch? For newcomers to the U.S., like international students or immigrants, or anyone new to credit, the process can seem intimidating. But with the right steps, you can start building credit from scratch and set yourself up for long-term success. In this article, we’ll walk you through how to get started, including using tools like secured credit cards, and share practical tips tailored for beginners.

Building credit from scratch means creating a credit history when you have none. Your credit history is a record of how you’ve managed borrowed money, like credit cards or loans, and it’s used to calculate your credit score—a three-digit number (typically 300–850) that lenders use to assess your reliability, as discussed in our article Credit Score Basics. If you’ve never had a credit card, loan, or any credit account, you likely have no credit history, which can make it hard to qualify for financial products.

This situation is common for:

• Young adults who haven’t used credit yet.
• International students or immigrants new to the U.S., where credit histories from other countries often don’t transfer.
• Anyone who has avoided credit in the past, relying solely on cash or debit cards.

The good news? You can build credit by starting with simple, beginner-friendly tools and practicing responsible habits over time.

A good credit history and score are crucial for several reasons:

• Access to Financial Products: A credit history helps you qualify for credit cards, loans, or mortgages, which can be essential for big purchases like a car or home.
• Lower Costs: A higher credit score can lead to lower interest rates, saving you money.
• Renting and Utilities: Many landlords and utility companies in the U.S. check your credit to approve applications. A lack of credit history might require a co-signer or higher deposits.

Here are practical steps to start building credit, including options for those with no prior credit history, like newcomers to the U.S.

A secured credit card is one of the easiest ways to begin building credit. Unlike a regular (unsecured) credit card, a secured card requires a cash deposit that acts as your credit limit. For example, if you deposit $200, your credit limit is $200. This deposit reduces the risk for the issuer, making secured cards accessible to people with no credit history.

• How It Helps: Secured cards work like regular credit cards—they report your payment history to the three major credit bureaus (Equifax, Experian, TransUnion), helping you build credit as you use the card and pay on time.
• Cards to Consider:
  • Discover it® Secured Credit Card: No annual fee, offers 2% cash back at gas stations and restaurants (up to $1,000 in purchases per quarter, then 1%), and 1% on other purchases. After 7 months, Discover reviews your account for a potential upgrade to an unsecured card, refunding your deposit.
  • Capital One Platinum Secured Credit Card: Requires a minimum deposit of $49, $99, or $200 (depending on your profile) for a $200 credit limit, with no annual fee. You may qualify for a higher limit after 6 months of on-time payments.
  • Citi® Secured Mastercard®: Requires a $200–$2,500 deposit, with no annual fee. It’s a straightforward option for beginners, though it doesn’t offer rewards.
• Tips for Use: Make small purchases (e.g., $20–$50), pay the balance in full each month to avoid interest, and keep utilization below 30%—ideally 10% or less.

If you have a trusted family member or friend with good credit, ask to become an authorized user on their credit card. As an authorized user, you get a card in your name linked to their account, and their positive credit behavior (like on-time payments) can be reported on your credit report.

• How It Helps: This can jumpstart your credit history without needing your own card.
• Tips for Newcomers: Ensure the primary cardholder has a strong payment history, as their late payments could hurt your credit. Also, confirm with the card company that authorized user activity is reported to credit bureaus—not all cards do this.

A credit-builder loan is a small loan designed to help you build credit. Instead of receiving the loan amount upfront, you make monthly payments, and the lender holds the money in a savings account. Once you’ve paid off the loan, you get the money (minus fees), and your on-time payments are reported to credit bureaus.

• How It Helps: This is a low-risk way to establish a payment history, which is 35% of your credit score.
• Options for Beginners:
  • Self (formerly Self Lender): Offers credit-builder loans starting at $25/month for 24 months. After paying off the loan, you get the money back (minus a $9 admin fee and interest).
  • Local Credit Unions: Many credit unions offer credit-builder loans with flexible terms, often tailored for newcomers to the U.S.
• Tips for Newcomers: Choose a loan with affordable payments, and ensure the lender reports your payment history to the credit bureaus.

Some credit cards are specifically for people with no credit history, including international students or immigrants. These don’t require a prior credit score or Social Security Number (SSN) in some cases, though you may need an Individual Taxpayer Identification Number (ITIN) instead.

• Cards to Consider:
  • Deserve® EDU Mastercard for Students: Designed for international students, offers 1% cash back on all purchases, no annual fee, and doesn’t require an SSN (you can apply with a passport and student visa). It also provides up to $5,000 in credit without a deposit.
  • Petal® 2 “Cash Back, No Fees” Visa® Credit Card: No annual fee, offers cash back, and considers banking history instead of credit history for approval. Great for beginners, including newcomers.
  • Jasper Cash Back Mastercard®: Aimed at professionals new to the U.S., offers 1% cash back (up to 6% with referrals), no annual fee, and doesn’t require an SSN (uses alternative data like income and employment).
• Tips for Newcomers: If you don’t have an SSN, gather documents like your ITIN, passport, visa, or proof of address to apply. Use the card responsibly to build your credit history.

Once you have a credit account, focus on building good habits:

• Pay on time every month, as payment history is the biggest factor in your credit score (35%).
• Keep credit utilization low (below 30%, ideally 10%), as advised in our credit score article.
• Check your credit report for free at AnnualCreditReport.com to ensure your accounts are reported correctly.

International students and immigrants face unique challenges when building credit, as U.S. credit systems often don’t recognize foreign credit histories. Here are additional tips:

• Open a U.S. Bank Account: Many cards for newcomers, like the Deserve EDU, may require a U.S. bank account. Open one with a bank like Chase, Bank of America, or an online bank like Chime, which often has no fees for basic accounts.
• Get an ITIN if Needed: If you don’t have an SSN, apply for an ITIN through the IRS to establish your identity for financial purposes.
• Use Rent Reporting Services: Services like RentTrack or Experian Boost can report your rent or utility payments to credit bureaus, helping build credit without a card or loan.
• Be Patient: Building credit takes time—typically 6 months of activity for a FICO score to be generated. Focus on small, consistent steps.

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Starting to build credit from scratch is a manageable process. Tools like secured credit cards, authorized user status, credit-builder loans, and beginner-friendly cards can help you establish a credit history. By paying on time, keeping balances low, and choosing the right products, you’ll create a strong foundation that supports your financial goals—like saving, investing, or qualifying for better loans.

As you build your credit, think about how it fits into your broader financial journey, such as freeing up money to invest in index funds (as discussed in our investing articles). For personalized guidance, consider speaking with a financial advisor to create a strategy that works for you. With consistent habits, you can build credit from scratch and unlock a world of financial opportunities.