How To Build Credit From Scratch

Your credit score is a powerful tool. It allows banks and other lenders to determine whether you are eligible for loans such as mortgages and credit cards. However, it doesn’t just impact your eligibility for loans. Your credit score is also used by insurance providers to set premiums on car and home insurance. It is also used by landlords as a way of deciding who gets to rent their homes.

Here’s everything you need to know about your credit score, and how you can build it from scratch.

Importance of credit score

As previously stated, your credit score is more important than many people realize, as you can use a good credit score to get great deals on loans, credit cards, and insurance premiums. If you have worked hard to get a high credit score, you will be saving potentially thousands of dollars each time you buy a financial product.

According to NerdWallet, ‘a 15-year home equity loan of $50,000 would cost a low scorer $22,500 more than someone with high scores. Therefore, it is worth spending time building a good credit score.

Reasons that could make your credit score drop

Credit scores change all the time, so there could be many reasons why your credit score might drop suddenly. Here are some reasons why your credit score may drop so that you know to avoid them:

  • Missed debt payments: if you have taken any kind of loan out (for example mortgage or student loan), but aren’t keeping up with regular payments, credit issuers will report this to major credit bureaus, which will lead to a significant decrease in your credit score.

  • Missed bill payments: if you are missing regular bill payments (such as utility bills), this will also lead to a significant drop in your credit score. One way you can ensure that you will be able to pay your utility bills is by researching to find the most affordable PPL electric rates.

  • Your credit utilization has increased: your credit utilization is the percentage of your credit limit that you use. If you have recently started using more of your credit limit or maxing out your card, it will lead to a significant drop in your credit score.

Tips on building your credit from scratch

If you have never purchased any financial products, chances are that you don’t have a good credit score. If you are looking to build your credit from scratch, here are some ways you build your credit from scratch.

  • Open a credit card: this can be one of the most simple ways to start building your credit score. If you have never had a credit card before, consider getting a secured credit card. This type of card requires you to submit a security deposit before you can get the card, as this protects the credit card issuer.

  • Add the right type of loan: another way to build up your credit score is to prove that you are good at repaying loans, so it might be worth taking out the right type of loan. There are specific ‘credit builder’ loans, where you pay money to a bank or credit union every month to prove that you are good with repayments. You will get this money back after you have completed the loan period.

  • Keep up regular bill payments: this is one of the most important things you can do. Make sure that you can afford your monthly bills and repayment plans, and pay them off, on time. You can also boost your credit score if you pay more than the minimum repayments on your loans.


Building your credit score from scratch is not an easy task, and it will take a lot of time and patience to create a high credit score. However, with these tips, it is certainly possible.

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