How to Raise Your Credit Score from Scratch

Banks Editorial Team · November 23, 2018

The answer to the question of how to raise your credit score is that you need to establish an account. Whether you open an account with a bank, apply for a single credit card, or become an authorized co-user. But raising your credit score is more than just applying for credit card. You need to keep up with your payments and ensure that you are only using as much credit as you can afford to repay. Overall it is important that you demonstrate that you are a responsible financial actor. And that means demonstrating that you know how to use credit responsibly.

The most valuable financial statistic of your adult life is your credit score. Every day we are told to keep track of our credit scores and to make responsible financial decisions to maintain its health. And we do (or try at the very least) because our credit score has an outsized impact on our available financial. But while you will often hear advice on maintaining a healthy credit rating, you do not hear as often the answer to a more basic question. That question is: How do you build your credit starting from scratch? What we want to look at today is how to raise your credit score just starting out. Check your current credit score and set a benchmark for growing your credit:

 

 

Tips on How to Raise Your Credit Score

Our first recommendation is also the most basic answer to the question of how to raise your credit score: open an account. If you have no established credit history, then the very first step you should take is to open an account in your name. Most importantly, this account needs to be reported to a major credit bureau (e.g. Experian, Equifax, or TransUnion). After all, they are the organizations that keep track of credit ratings.

One example of the type of account that would suffice for this purpose is banking accounts. Specifically, you should open checking and savings accounts. You could also apply for a single credit card as an alternative to opening a checking and savings account (although doing both would not hurt). We emphasize that if you are going to apply for a credit card that you should start with a single card. As you may or may not be aware, an inquiry is made into your credit each time you apply for a credit card. Even though you may not currently have a credit rating, numerous inquiries into your credit within a close period of time can actually damage your credit rating. Additionally, having multiple new credit cards can damage your credit rating. This is because one of the variables used to calculate credit ratings is the number of new lines of credit opened.

In summation, how to raise your credit score? Open an account or apply for a credit card. And if you choose the latter, you take it slow and easy when using the card to build your credit.

Looking to build your credit? Use this convenient tool to find a credit card that’s perfect for a beginning credit rating.

 

 

Apply for a Credit Card

Another answer to the question of how to raise your credit score is related to the above suggestion of applying for a credit card. But you become an authorized co-user of a credit card instead of applying for your own. Usually, this is a close family member (e.g. your mother or father). This method is perhaps one of the best ways to start your credit from scratch. If your co-user has good credit, then that will benefit your credit rating.

Nevertheless, whether you intend to apply for your own credit card or become an authorized co-user, it is important that you learn to use credit responsibly. It is a good idea to avoid doing things like taking cash advances. You should be sure to limit your use of credit. Some experts suggest that you should only use 30% of your available credit to maintain a good credit utilization ratio. At the very least you should ensure that you never borrow more than you can pay at the end of each month. Maxing out your credit cards is very inadvisable and should be avoided at all cost.

Maintain a Healthy Credit Score

Our final recommendations for how to raise your credit score will also help you maintain a healthy credit score after you have established one. It is vital that you manage your accounts properly. That means that you need to be sure that you are making payments on time for your financial obligations. You need to be sure that you are keeping a close eye on the payment dates of your credit card, your loans, and even your rent. Along those same lines, you should not take on more financial obligations than you can afford. You need to carry small credit balances; you should only take out as much credit as you can afford to pay. And most importantly, don’t spend too much.

Are you spending too much? What is your optimal monthly payment for your credit cards? Use our calculator below to help determine if you are spending more than you should be.

 

 

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