How to Build Your Credit History from Scratch

Receiving loans, getting approved for credit cards, or even renting an apartment is harder without a credit report to validate dependability. However, building credit requires you to have credit in the first place. So, how can you start? To begin, it’s important to establish a solid credit foundation.


3 ways to build credit

Building credit history takes time and won’t happen overnight, but a consistent effort can help you achieve your financial goals.

Seek a credit builder loan

A credit builder loan is a type of loan that enables you to build your credit. It works like a savings account, but you won’t have access to the funds immediately. Essentially, with a credit builder loan, you borrow a small amount that is held by the lender in an account that you cannot access. You will need to make monthly payments until the total amount is repaid.

Once you have paid the loan in full, the entire account, including any interest accrued, will be returned to you. Each payment you make will be reported to the credit bureaus, which will help you establish a good payment his tory.


Apply for a credit card

When you open a credit card, your payment history is reported to the credit bureaus, which can help improve your credit rating over time. Here are some common starter cards to consider.

  • Secured credit card: Secured cards are a great option for first-time credit cardholders. Unlike traditional cards, they require a security deposit that becomes your credit limit. This helps beginners learn to manage their spending, and all card activity is reported to the credit bureaus.
  • Store card: Experts caution against opening a store card due to their higher interest rates compared to traditional credit cards. However, if you pay your balance in full each month and avoid interest charges, store cards can be an excellent choice to establish credit. Store cards are generally easier to qualify for and often come with perks such as store discounts and sign-up rewards.
  • Prosper Credit Card®: The Prosper® Card is great for those with less-than-perfect credit because it doesn’t require an initial security deposit. It starts with a low credit limit, limiting risk and avoiding overspending.

Regardless of the type of credit card you choose, using it for everyday purchases and paying it off monthly can help you build a positive credit history and raise your credit score.

Get credit for your everyday bills

There are ways to build credit without opening a credit card. Some rent-reporting services, such as Rental Kharma, can add your payments to a credit report, helping to establish creditw orthiness and build a history of on-time payments.


Additionally, Experian Boost does the same thing with your utility bills. Experian reflects your utility payments (such as your phone or internet bills) in your credit report, further building and establishing your credit history and giving you a slight score boost.

These alternative options may not be enough to establish credit on their own, but they can help boost your score in concert with the other methods listed here.

How to maintain good credit habits

Developing good credit habits is crucial for establishing a positive credit history and achieving financial success. Here are some tips to help you get started.

  • Make on-time payments: Paying on time avoids late fees, penalties, and credit score damage that can hinder future loans and credit. Set reminders, schedule automatic payments, and track due dates to prevent setbacks.
  • Keep your balances low and pay them off each month: High credit utilization can negatively impact your credit score. Paying off your balances in full each month can help you avoid expensive interest charges.
  • Monitor your credit reports regularly: This will help you stay informed about your credit score and any suspicious or unauthorized activities that might be affecting your credit history. Get free copies from each credit bureau by visiting If you notice any errors or unrecognized items, you can dispute them.
  • Create and stick to a budget: A budget is key to financial stability. It involves categorizing your income and expenses, assigning amounts, and monitoring spending. Stick to it to achieve your long-term financial goals.

Building your financial future

It takes time to build credit, but with patience and diligence, you can establish a strong credit history.

By following the tips and strategies outlined in this post, such as paying bills on time, opening a starter credit card, and keeping your balances low, you can start building credit history and set yourself up for a brighter financial future.

Written by Rose Wheeler

Rose Wheeler oversees the blog’s writing team and creates content strategy for Prosper. With 15+ years of journalism experience, she has covered business and finance-related topics such as consumer finance, financial products, banking, credit, and money management. Previously, Rose served as Editor-in-Chief for Wealth Hub at Future, Deputy Editor at Forbes Advisor, and Content Editor/Strategist at Millennial Money and The Motley Fool. In her free time, she enjoys exploring new places, reading, and playing video games.

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The Prosper® Card is an unsecured credit card issued by Coastal Community Bank, Member FDIC, pursuant to license by Mastercard® International.

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