Building Your Credit History from Scratch

It may seem a contradiction of sorts, but lenders will check on your credit history to see if you’re worthy to be approved for a loan. So, if you have never borrowed money in your life, getting that first loan might be a little tricky and, in some cases, expensive. Because lenders have no knowledge of how good or bad you are at repayments, you could be looking at high interest rates.

If only you can get a credit card, you can start building a credit score right away. Unfortunately, you can’t get one without the other. So what are you supposed to do?

Understand the factors that affect a credit score

Starting from scratch is possible, but will take some work. The first thing you need to do is to understand the factors that can make or break your score. These include the new credit you acquire, debts or amounts owed, types of credit used, payment history and length of credit history.

Once you acquire your first credit, which is often handled with suspicion, you can then start building your score. How?


Pay on time

The goal is to build a history of full and on-time repayments. Since full payment may not always be possible, make it a habit not to miss your due dates. This applies to all debts you have, from credit card to mortgage.

Use your credit card wisely

It’s so easy to spend money you don’t own. But failure to pay on time results in bad credit. So make sure you keep credit card usage low. Don’t max it out.

Keep accounts to a minimum

If you open too many accounts at the same time, your average account age will be lower. So limit your accounts and keep them open as long as possible.


Check credit report regularly

Mistakes happen even when everything is digital. So make sure to regularly check your credit report and have any discrepancies fixed, especially when it can lower your score. Ready to start building your credit history?

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