HomeLearning and supportHome financingThe ultimate guide to establishing and building your credit

The ultimate guide to establishing and building your credit

Home financing

By StaffMay 8, 20254 min read

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Need tips on how to build credit from scratch? Check out this article on ways to help bring up your credit score.

It’s a three-digit number that can decide a loan request: your credit score. Your credit score will help determine if you qualify for a line of credit, as well as the interest rate you’ll have while repaying the loan. The higher your credit score, the lower the interest rate will likely be, which ultimately can save you a lot of money on repayment over the life of the loan, especially when you’re buying a home.

If you feel like it’s difficult to get a line of credit because you don’t have any credit history for a lender to look at, you are not alone. So, how do you get good credit when you don’t have any credit to start with? No worries, this is your ultimate guide to helping build your credit from nothing.

First off, the process of building your credit from scratch won’t happen overnight, but you can start seeing results early on. It often takes about six months to begin establishing credit.

Ways to begin your credit journey when you have no credit include:

Apply for a secured credit card or become an authorized user on a parent’s/guardian’s or partner’s card
Make your payments on time and, if possible, pay the balance in full

About Clayton

Founded in 1956, Clayton is committed to opening doors to a better life through homeownership. Clayton is a leading single-family, values-driven home builder dedicated to attainable housing, sustainable practices, and creating a world-class experience for customers and team members. The company’s portfolio includes a comprehensive range of site-built, modern manufactured, Tiny, CrossMod® and modular housing. In 2024, Clayton built more than 60,000 homes across the country. For more information, visit claytonhomes.com.

Who we are

Now let’s go into some more detail on how to establish and maintain credit with these tips. Just remember, Clayton is not a financial advisor, so please consult a professional for help building your credit.

Build your credit with a secured credit card

A secured credit card is a card supported by a deposit, for example, $250, that’s paid upfront. It may seem strange to open a card for a line of credit and provide the money for it upfront, but this method allows you the opportunity to show credit worthiness. You will get the deposit back when you close the account. Try to keep the account open if possible, even if you don’t use it often. This will help you continue to gain credit, and closing a credit-related card can often hurt your score. Check with your bank or a local credit union to see if they offer a secured credit card option.

Become an authorized user on a parent or guardian’s card

If a secured credit card isn’t the route you would like to take, becoming an authorized user on your parent’s, guardian’s, or partner’s credit card could be a good jump start to build your credit, if possible. Essentially, you would be gaining credit based on the activity of their card. However, you inherit that person’s highs and lows, and you may become responsible for the obligations of the account, so please consider this option carefully.

Make payments on time

If you want the typical key to success when it comes to building your credit, this is it. Setting a reminder on your phone or calendar can help with paying on time. Also, setting up automatic bill payments might be an option that you prefer. If at all possible, pay the balance in full. When building your credit, this practice looks very good on your credit history because it shows that you are disciplined and can pay consistently at the same time.

Keep your balance low on credit cards

If you can’t pay your credit card balance in full each month, paying as much of the balance as you can is still very helpful for two main reasons. First, the lower the remaining balance is, the less you pay in interest.

And second, for building and maintaining your credit, it’s important to keep a low balance and not max out the limit. It is recommended to keep the balance at less than 30% of the credit line.

Paying down your student loans can help

Your student loans can help your credit because your credit report shows the payment history and longevity of the loan. If you are making monthly payments on time, your credit score will continue to get stronger.

Use a co-signer

If you can’t begin a loan on your own, you can find a trusted, responsible co-signer, preferably with good credit. Co-signing allows you the chance to get a loan as you are establishing your credit because it takes the co-signer’s credit score into account as well. Just make sure you understand all of the requirements and responsibilities involved if you were to become unable to pay back the loan.

Monitor your credit report often

It’s important and easy to monitor your credit. You can sign up through one of the free credit report programs and monitor the activity reported. You can dispute any errors or discrepancies you see by contacting the credit bureau or the creditor directly. When reading your credit report, you will see a report from all three major credit bureaus – Experian®, Equifax®, and TransUnion®. All three bureaus may have different items reported to them, or your credit report and score could be largely identical across all three. It just depends on who the creditor chooses to report the activity to.

Build your credit with the bills you already pay each month

You might be thinking, “What about all the monthly bills I pay? Can those help build my credit?”

If you currently rent, check with your landlord to find out if they are reporting your payment history to any credit bureaus. If not, with the help of some resources, there are ways to report your monthly rent and reflect your good payment history.

As for your other monthly bills like your cellphone, some of your monthly payments may be reported to credit agencies. When you sign up for one of those monthly obligations, make sure you have it in your name so you can get credit for the payment history. Most importantly, make sure you always pay them on time to strengthen your credit.

Things not to do while trying to build your credit

While you are working on building your credit, there are some things to be aware of, so you don’t cancel out all the work you have done. Here are a few things to consider.

Be cautious of how many times you have your credit pulled. If you are shopping for a car or another large purchase, or looking to take out a loan, try to do all of your loan shopping at one time within 14 days because it will usually only count as one credit inquiry hit.

Don’t let your medical bills go unpaid. As of July 2022, most medical bills are not reported to your credit unless they go unpaid for more than a year, in which case they may negatively impact your credit score. Contact the medical billing office and discuss payment options that work for you. That way you can pay the medical bill over time and prevent it from being reported as a late payment or in collections on your credit.

We hope that these steps will help you plan your path to a strong credit score and achieve your goal of homeownership. Credit is an important tool for any large purchase, and this guide can help you gain confidence as you make important long-term investments. Explore our Learning & support page for more home financing information and guides.