How to Build Credit From Zero: What Actually Moves Your Score

If you have never had a loan or a card, you do not have a bad credit score. You have no score at all, and that is the first thing to fix. Here is what a score is built from and the quiet, low-cost ways to start one.

What a credit score actually is

The Consumer Financial Protection Bureau describes a credit score as a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information in your credit reports. Companies use a mathematical formula, called a scoring model, to turn that report into a number.

Two details from the CFPB matter early on. First, you do not have just one credit score: different scoring models and different data give different numbers. Second, scores are used for more than loans. The CFPB says companies use them to decide whether to offer you a mortgage, credit card or auto loan, and also for tenant screening and insurance.

What goes into it

FICO, the company behind the best-known scoring models, publishes five categories and what each is worth for the general population:

• Payment history: 35 percent. Whether you have paid past credit accounts on time.
• Amounts owed: 30 percent. Using a lot of your available credit may indicate you are overextended.
• Length of credit history: 15 percent. Longer is generally positive, but FICO says it is not required for a good score.
• Credit mix: 10 percent. Your mix of cards, loans and other accounts.
• New credit: 10 percent. Opening several accounts in a short time is a greater risk, especially with a short history.

FICO adds that these levels apply to the general population and may be different for different credit profiles. Read the list as a priority order, not an exact formula for you.

Notice what is missing: nothing in these categories rewards paying interest. The two biggest categories are paying on time and not using too much of your limit.

Ways to start a history

With no history, a lender has nothing to look at, so the first goal is simply to get on-time payments recorded. A card issuer such as Citi lists the usual starting points:

• A secured credit card, which asks for a security deposit equal to your credit limit.
• Becoming an authorized user on someone else's account, ideally a person with good habits.
• A store card, which is typically easier to qualify for than a traditional card.

One condition on the authorized-user route: the same source notes that the account's activity only shows up on your credit report if the card issuer reports authorized users to the credit bureaus. Ask the issuer before counting on it.

Expect a wait. The source says the major scoring models typically require several months of credit activity before a score exists.

The habits that do the work

1. Pay every bill on time. Payment history is the largest category, so set up an automatic payment for at least the minimum.
2. Keep the balance well below the limit. Amounts owed is the second largest category.
3. Pay the statement balance in full when you can. The CFPB says most card companies charge interest from the billing date until they receive your payment, and that rules differ by company, so read your cardholder agreement.
4. Treat the card like a debit card. Reddit users quoted by The Motley Fool in 2022 gave the same advice: only buy what you could afford to pay for today, and remember that being allowed to carry a balance does not make it a good idea.
5. Keep your first card open. The same article quotes a Reddit user making the point that credit age is 15 percent of a FICO score, and that you can ask to switch an old card to a no-fee version rather than close it.
6. Do not apply for several accounts at once. New credit is its own category.

The short version

Start one account that reports to the bureaus, pay it on time automatically, use only a small part of the limit, and leave it alone for a few months. There is no trick beyond that, and no need to pay interest to prove anything.