From Zero to Hero: Building Credit for Beginners

Tiny house under construction with stacked coins beside it to symbolize credit building

You're young, either starting your first job or working for a while, and have a list of financial milestones in mind: rent an apartment, buy a car, or buy a house. But in America, unless you pay in cash, all these things are beyond reach without credit.

Unfortunately, no one can offer you credit without a credit history. They will deny you or impose exorbitant interest rates that make the credit unaffordable. Although building credit from scratch is tough, there's a way around it.

In this article, we delve into the meat of it and tell you where to start when building credit for beginners. We also tell you how to apply for a credit card for the first time and the best credit card for beginners to build credit. We are confident that it’ll be easy to build credit once you know what it takes.

What Is Credit?

Before we delve further, let's get the term ‘credit ’ out of the way.

Credit is the capacity to borrow money in the form of credit cards, mortgage loans, and other personal loans, to pay it back with interest. To qualify for credit, lenders often look at your credit score, a three-digit number used to express your ability to borrow and pay loans. The higher the credit score, the more financially responsible you appear to the lenders. To access any loan in the U.S., you must raise your credit score.

How To Start Building Credit For Beginners

Here are ways to start building your credit responsibly:

  1. Get A Secured Credit Card

  2.  Hand presenting a credit card to the foreground

    A secured credit card is one of the best credit cards for beginners to build credit. The card is just like a traditional credit card with a credit limit and interest fees, only that it requires a security deposit. The deposit is refundable at the close of the account, on condition that you have paid off all your debt and do not owe the lender any money. So how does this help with building credit for beginners?

    You will be asked to place a small deposit of $500 or less, and your credit limit will first equal that deposit. For example, if you place a $500 deposit, your credit limit will be $500. After a predetermined period, the card issuer may review your credit history, raise the limit, or even return your deposit and offer you an unsecured card. So, ensure your payments are always on time. Also, note that any missed payment is taken out of your deposit.

    The best credit cards for beginners to build credit are those that don't charge an annual fee and forward your history to all three credit bureaus for record keeping.

    How To Apply For A Credit Card For The First Time

    It's easy to apply for your first credit card. Take the following steps:

    1. Choose the card you feel is best for you. Lenders design unique cards for building credit for beginners, with special features, benefits, perks, and annual fees. Consider a few of these offers and choose the best credit card for beginners to build credit.
    2. Contact a few lenders and inquire if you prequalify for their credit cards. The response you get will further help you narrow down your selection of potential lenders.
    3. Apply for a credit card, either online or in person.
    4. Read the cardmember agreement and take note of details like the fees and interest charged, ways to use the card, and how to make the payments.
    5. Come up with a budget and keep an eye on your expenses so you won't spend much more than you can pay off to avoid missed payments, penalties, and high balances.

  3. Apply To Be An Authorized User

  4. Hand holding a credit card for online shopping

    Sometimes, the best credit cards for beginners to build credit are someone else’s. Becoming an authorized user on someone else’s credit card account can be a great way to start building credit for beginners, so your family and friends may be able to assist with building your credit profile.

    However, not everyone can help because once they add you to their credit card account, their card information appears on your credit report and influences your credit scores. So before you ask to become an authorized user, let your loved one confirm their credit payment history is positive. Also, it's better to be placed on a card with a low credit card utilization ratio than a high one.

  5. Apply For A Credit-Builder Loan
  6. A credit-builder loan is another effective way of building credit for beginners. A credit-builder loan is an installment loan designed for individuals who are new or are rebuilding their credit. You apply for the loan, but the funds are not available immediately. You start by paying an agreed amount to the lender every month for 6-12 months, and then you receive the money in a lump sum at the close of the payment term. The lender deducts the fees and interest owed.

    A credit-builder loan helps you save as you earn higher credit scores. It helps you prove that you are responsible and can make on-time payments. To have a positive impeccable record, only take out a loan you're confident you can pay on time because any late or missing payments hurt your credit score.

Building Credit Is Challenging For Beginners, But Not Impossible

Building or rebuilding your credit from scratch is no mean feat, but several avenues could help you raise your credit score steadily and confidently. You could get a secured credit card, become an authorized user, or secure a credit-builder loan. has useful resources – including the best credit cards for beginners to build credit from our featured partners – that could help you get started. Contact us today for more information and the best mortgage offers for building credit for beginners.