How to Build Credit From Scratch

Learn different approaches to start building credit from the ground up


There are plenty of areas where credit can influence people’s lives. But if you’re trying to establish credit, things may seem a little backward: You have to actually have credit in order to build credit from scratch?

Yeah, it may seem a little strange. But understanding some credit basics can help you get started. So here are a few ways to build credit and some tips about how to use credit responsibly.

Use a Credit Card Responsibly to Help Build Credit

When you apply for credit cards, you’re asking for a type of open-ended loan from a lender. As your application is considered, the lender may take into account your credit history by looking at your credit report, according to the Consumer Financial Protection Bureau (CFPB).

If you have no credit history, there may not be much for a lender to consider. And that, the CFPB says, could make it more difficult to secure loans, housing and employment.

But some credit cards are designed with this in mind. The following cards can be used to help establish and build credit, if they’re used responsibly. That means doing things like making on-time payments each and every month. 

Secured Credit Cards to Build Credit

Secured credit cards are a lot like traditional cards, with one main difference: They require a deposit.

If you’re approved for a secured card, you put money down to open the account. That money acts as collateral, similar to a security deposit for an apartment rental. Your deposit is usually refundable. 

With Capital One’s secured card, there are two ways your security deposit can be refunded: You can earn back your deposit as a statement credit by using your card responsibly. Or Capital One will refund it when you close your account and pay your balance in full.

Other than the deposit, secured cards function like traditional cards. And they often look much the same too. But keep in mind that credit limits on these cards may be lower. And they may not have rewards or bonuses.

Student Cards to Build Credit

There are some credit cards designed with college students and recent graduates in mind. And like other credit cards, responsible use of your credit card may help you build credit. That means doing things like making on-time payments every month.

Some student credit cards offer cash back rewards and other perks, too. In some cases, you may not even need to be a student to apply for one of these cards. Check with your lender for more details about eligibility and benefits.

Cards for Average and Building Credit

If you’ve begun to build credit, but it’s still not perfect, you may still have options. In fact, many credit card companies offer cards for exactly these cases. A good starter card, when you use it wisely, may be a good tool for you to use to help you build your credit. And it may even have features like no annual fee or cash back rewards. 

If you get one, just be sure to use it responsibly. Remember, the goal is to help—not hurt—your credit score. That means it’s important to do things like pay bills on time and stay within your credit limit. 

Become an Authorized User

If you’re struggling to qualify for a credit card on your own, there may be other alternatives. One option is to become an authorized user. You can become an authorized user if someone gives you access to their existing credit card account.

If you’re added as an authorized user, you get your own card, but the original card owner is responsible for payments. In other words, that account owner must trust you to use the card responsibly. Any negative actions, like missed payments, could reflect poorly on both your credit ratings.

If both you and the primary cardholder use the credit card responsibly, then it’s possible that being an authorized user may be a way in which you can work to build credit. But the opposite is also true, according to the CFPB.

A conversation about your potential account owner’s credit—and your own spending habits—may help you get off on the right foot. Some cards even allow the primary cardholder to set spending limits for authorized users. 

Build Credit With a Co-Signer

A co-signer may vouch for you to help you get your first credit card. By signing along with you on a credit card application, a co-signer agrees to pay the bills if you can’t. The only way to build credit with a co-signer is with responsible card use.

And like the authorized user scenario, irresponsible use has consequences. The CFPB says both your credit and your co-signer’s credit could take a hit if you’re late or delinquent on card payments. The CFPB also says co-signers are required to pay missed payments—and even full loans—if the borrower doesn’t pay them back.

There are some differences, though. A co-signer may not get a card of their own, receive statements or have access to make any charges to the account without your permission. 

Get a Loan to Help Build Credit

A loan may also give you the chance to establish credit. As with credit cards, when you make loan payments responsibly, your credit score could benefit. Some loans are even aimed at those new to credit. 

Credit Builder Loans

As their name suggests, a credit builder loan (CBL) is designed with a different goal in mind than traditional loans. And because of that, they work a little differently: Borrowers make payments before getting the money.

Credit unions typically offer CBLs, according to the CFPB. But they may be available elsewhere too. The loans start with the lender depositing a small amount—around $300 to $1,000—into a locked savings account. Borrowers then make small payments over a set period, known as a term, usually six to 24 months long. When the term ends and all payments are made, the money is paid out. 

As payments on a CBL are made, progress is reported to credit bureaus. That’s how a CBL can help you build credit. But it’s important to take payment due dates seriously. Late or missed payments could end up hurting your credit, the CFPB says.

Other Loans

Mortgages, student loans and car loans can also affect your credit. If you have debt like this, you could have some credit history already. So it wouldn’t make sense to apply for them to build credit from scratch. But keeping current with your payments can help you continue to build credit.

However, falling behind on payments for secured loans, like car loans or mortgages, can do more than just affect your credit. That’s because the vehicle or property is used as collateral. And in a secured loan, if you fall behind on payments, you could risk losing the collateral.

Maintain Good Credit Habits to Help Build Credit From Scratch

It takes time to establish credit from scratch. After you’ve established credit, it’s still important to practice responsible habits. These tips about responsible credit use could help you continue to build your credit score. 

1. Make Payments on Time

Credit scoring companies FICO® and VantageScore® both say payment history—specifically, your track record of making on-time payments—can be a significant factor in determining your credit rating. You might consider setting up automatic payments to ensure you don’t miss a payment due date. You could also use email reminders or calendar alerts to remind yourself. 

2. Create a Budget

Creating a budget to compare your income to expenses is a key step to reaching your financial goals, the CFPB says. Seeing where your money goes each month could help you set aside loan or credit card payments before you start spending each month.

3. Exceed Minimum Payments

It can be tempting to make just that minimum payment you see on your credit card statement. But those minimum payments come with a cost—interest charges. And interest can add up, costing you more money in the long run and making it harder to pay off debt. Take it from the CFPB: “Paying off your balance each month can help you get the best scores.” 

4. Stay Under Your Credit Limit

Maxing out your card’s credit limit could reflect negatively on you and your financial situation, according to the CFPB. Experts recommend using no more than 30% of the total credit you have available.

5. Be Careful With Credit Applications

Applying for a bunch of credit at once isn’t likely to help you build credit any faster. In fact, it could make your financial situation look worse than it is, according to the CFPB. That’s because credit scoring takes into account your recent activity. And multiple hard inquiries could hurt your score.

6. Monitor Your Credit

Once you start to build credit, it may be a good idea to keep track of where you stand. You can get free copies of your Experian®, TransUnion® and Equifax® credit reports by visiting AnnualCreditReport.com. 

And there’s also CreditWise from Capital One. When it comes to monitoring your credit, CreditWise makes it easy. And it’s free, whether you’re a Capital One customer or not. Plus, using CreditWise won’t hurt your score, so you can check it as often as you like. That’s a major plus if you’re working to build credit.

Timeline to Build Credit From Scratch

There’s no official timeline for building credit from scratch. But there is a bottom line: Building credit can take time, and it requires financial responsibility. But by steadily making progress, you may set yourself up to one day reach bigger financial goals, like buying your own home.


Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention

Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many scoring models used by lenders. It likely won’t be the same model your lender uses, but it is an accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Alerts are based on changes to your TransUnion and Experian® credit reports and information we find on the dark web. The tool is not guaranteed to detect all identity theft.

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