Building Credit for the First Time
Building credit can be a little intimidating. Not only are we faced with a very confusing system but also tons of misinformation and misconceptions. This leaves many of us – especially those trying to build credit for the 1st time - feeling a little lost and unsure of the best way to get started.
Building credit can be a little intimidating. Not only are we faced with a very confusing system but also tons of misinformation and misconceptions. This leaves many of us – especially those trying to build credit for the 1st time - feeling a little lost and unsure of the best way to get started.
Taking the right steps is key when just starting to build a credit report and score. Here’s what you need to know to get on the right path.
Create Payment History
To start building a credit report and generating credit score(s), you must have accounts reporting, preferably to each of the three major reporting agencies – Equifax, Experian, and TransUnion.
Having an open and active account with a lender that is reporting your balances and pay history is a must when building a report and score.
Here are a few account options that beginners can use to start building a payment history and on the way to a healthy credit report and score:
Credit Builder Loans
Many local and online financial institutions offer loans designed to help individuals with no credit history. Opening one is a great way to start creating pay history. Credit builder loans work differently than traditional loans – instead of getting the funds right away or upfront, you get the funds after you have finished paying off the loan.
Secured Credit Cards
A secured credit card requires that you provide an initial security deposit that the lender will hold as collateral. They will issue a credit card, typically for the same amount although some have options for smaller deposits, that you can use to make purchases. You must maintain a low balance and make all payments in full and on time. A best practice is using the card for normal purchases and then paying it right away or shortly after. It’s important to only use the card to create a pay history - not to finance purchases and create debt.
Rent or Bill Paying Apps
Rent and bill reporting apps allow you to track and pay your normal obligations, like rent, utilities, and cell phone bills through the app that reports those payments as a loan or credit card to the credit bureaus (again, preferably all three).
Become an Authorized User
Becoming an authorized user on someone else’s account can be a good way to add payment history and quickly gain a score. You need to be sure this person is responsible, has good pay history, currently pays on time, and maintains low balances. There are downsides to this option – your report and score will be affected if they miss a payment, and many lenders won’t include these accounts when considering your creditworthiness since it’s not truly your debt or payment history.
Getting Started
It’s recommended to have 2-3 different tradelines reporting when trying to build credit. A good “mix” is to have a credit builder loan, a secured credit card, and possibly rent, if you pay it, reporting. Once you establish these accounts, you’ll want to be sure to make all payments on time and maintain low balances.
It takes around 6 months to generate a score with both FICO and VantageScore.
You’ll want to monitor your reports and scores regularly. You can get your free reports weekly from www.annualcreditreport.com. Both FICO and VantageScore offer free and paid options for monitoring your score(s).
We often hear that no credit is worse than bad credit, which can make many of us feel a little discouraged. Instead, think of it as having a clean slate and the ability to create your own credit future!
If you haven’t already, we encourage you to take the America Saves Pledge. After making your new spending & savings plan, you’ll receive support, reminders, and tips from America Saves that will help keep you on track toward achieving your goal.
CHECK OUT OTHER SAVINGS JOURNEYS FROM SAVERS JUST LIKE YOU
The Gift of Homeownership
By Quaneka Willis
Quaneka Willis, a single mother of three children, was receiving rental assistance through the Housing Authority of the City of Milwaukee when she decided to take control of her finances.
Another Dream Realized
By Mary Brown
Mary Brown was already a disciplined individual when she came to Wisconsin Women’s Business Initiative Co...
Budget like Nohemi
By Nohemi
Nohemi found out about America Saves a few years ago as an undergraduate at the University of Illinois at...
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “w...
Taking Steps Toward Financial Fitness
By Nicky Vasquez
Nicky Vasquez learned about Virginia Saves when she attended her first class with Bank On Virginia Beach....
Saver Story: Set a Goal, Make a Plan!
By Shannon
We've chosen Shannon as our Saver of the Month! Her approach to saving for her family’s dream home is a great example of how #ThinkingLikeASaver can look different for everyone, but has great payoffs and rewards.
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “when I started encouraging them to save because that’s when they started receiving small bills from family on the holidays.”
Transforming “I Can’t Save” to “I Will Save”
You will not believe what it took to completely change my life. About three years ago, the HR Administrat...
A Think Like A Saver Attitude
By Melissa
Melissa has always been thrifty with a #ThinkLikeASaver attitude. This served her family well when her hu...
Developing a Savings "Game Plan"
By Eunice Diaz
Eunice Diaz, a teacher in Colorado Springs, had been noticing a pattern. Despite the fact that she and he...
Budget like Nohemi
By Nohemi
Nohemi found out about America Saves a few years ago as an undergraduate at the University of Illinois at...
A Think Like A Saver Attitude
By Melissa
Melissa has always been thrifty with a #ThinkLikeASaver attitude. This served her family well when her husband lost his job in 2014. Using their savings, Melissa’s family stayed afloat while her husband found a new job.
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “when I started encouraging them to save because that’s when they started receiving small bills from family on the holidays.”
Jump-Starting a Financial Makeover
By Nichelle Johnson
Nichelle Johnson, a single mom with two teenage children, knows what it’s like to stretch a dollar. When ...
Put 20 Percent Away
By Melissa
“I am a single mother, and I make ends meet for me and my daughter, but I wanted to put money away for my...
Saving is a Family Affair
By Jeff
Saving is truly a family affair for Jeff’s household. During America Saves Week 2019, he pledged to save ...
Don’t Laugh at Saving Spare Change
By Brittany
Virginia Saves saver, Brittany, decided to start saving again when she became a single mother. She thinks...
Put 20 Percent Away
By Melissa
“I am a single mother, and I make ends meet for me and my daughter, but I wanted to put money away for my daughter for a college fund. So I started saving 20 percent of my paycheck every month to put it away in a savings account with a high Annual Percentage Yield (APY). By the time my daughter is 18, I will have saved nearly $90,000.”
Saving is a Family Affair
By Jeff
Saving is truly a family affair for Jeff’s household. During America Saves Week 2019, he pledged to save ...
Starting and Continuing a Savings Journey
By Kiara Hardin
When Kiara Hardin, now a junior at Western Illinois University, became an intern with the Chicago Summer ...
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “w...
Budget like Nohemi
By Nohemi
Nohemi found out about America Saves a few years ago as an undergraduate at the University of Illinois at...
From Overwhelmed to In Control
By Debi
In 2017 Debi felt overwhelmed. Her credit cards were maxed, and she wasn't exactly sure how to handle it. When asked how her credit issues started, her answer sounded like many Savers that we've spoken to: making too many impulse purchases.
Developing a Savings "Game Plan"
By Eunice Diaz
Eunice Diaz, a teacher in Colorado Springs, had been noticing a pattern. Despite the fact that she and he...
Inspired to Build Savings By Starting Small
By Sharon
With little-to-no money in the bank and living on a limited income with her adult daughter, Sharon wasn’t...
Taking Back Control Over Finances
By Nadine Bialo
After becoming a Virginia Saver and getting help from BankOn classes and coaching, Nadine Bialo took back...
Getting Out of Debt
By Tonya Shelton
In 2004, Tonya Shelton was facing financial ruin. Barely making more than minimum wage and having lost he...
Savings #ImSavingForSweepstakes
#ImSavingFor Winner Story
By Pedram R.
America Saves awarded one lucky saver, Pedram R. from California, $750 for sharing his #ImSavingFor story. Pedram said, “Saving is important to me because it proves I am not willing to buy unnecessary things to please others or to be perceived as successful.”
Saving is a Family Affair
By Jeff
Saving is truly a family affair for Jeff’s household. During America Saves Week 2019, he pledged to save for retirement. But making a commitment and creating a plan to save isn’t a new concept for him.
If we feature you in our newsletter, you get $50.
You May Also Be Interested In...
Take the America saves pledge
Make a pledge to yourself and create a simple savings plan that works. Complete the Pledge and America Saves will send you short email and text reminders, resources and tips to keep you on track towards your savings goal. Become part of an entire community of savers. Get started now!
creative ways to fund your savings
Those with a savings plan are twice as likely to save successfully. Taking the America Saves Pledge is a pledge to yourself to start a savings journey and America Saves is here to encourage you along the way. Take the first step toward creating a better financial future. Make a plan, set a goal, and pledge to yourself to start saving, today.
Congrats on completing the pledge!
Take the America Saves Pledge
Make a pledge to yourself and create a simple savings plan that works.