Everyone starts out with zero credit and then must work towards building a high credit score. Some people may not fully understand credit and then end up with a poor credit score that prevents them from obtaining lines of credit or loans with low-interest rates.

There are several ways to build a credit score, even if you have a low income or no credit history. Let’s review your options.

Apply for a credit card

When used responsibly, credit cards are a powerful tool to begin building credit. College students may be able to get a student credit card, which is unsecured (meaning you don’t have to pay a deposit first) and easier to obtain with a low income.

Alternatively, you could get a secured credit card. In order to receive a line of credit, the applicant must first put down a deposit. The deposit is usually equal to the line of credit. For example, if you put down a $200 deposit, you will get a $200 line of credit. Basically, the deposit acts as a backup in the event that you can’t pay your credit card bill. Banks consider secured credit cards less risky for them, so they may be more willing to give you a line of credit.

No matter which type of credit card you decide to try, avoid applying for too many cards at one time since this could lower your score.

Become an authorized user

An authorized user is an individual who is added to another person’s line of credit. For example, a parent could add you to their credit card account as an authorized user. By becoming an authorized user, you could have years of good payment history show up in your credit report and subsequently raise your score.

This strategy should be used cautiously. If the primary user misses a payment or uses a high amount of their credit line, it could damage your credit score. It’s important to choose someone that you trust and has responsible financial habits.

Look into credit-builder loans

Loans aren’t always the best way to build a credit score since you could end up owing money that you can’t pay back. However, a credit-builder loan may be an excellent option to help you build credit, especially if you have the ability to make payments on time.

Unlike other types of loans, you don’t get access to the money immediately. How it works is that a credit union will put the loan in a locked savings account. Then you will need to make payments to the credit union for a specified amount of time. The payments are then registered with credit agencies. Once you finish paying off the loan, you get access to the savings account and hopefully a higher credit score.

Pay your bills on time

You should get in the habit of paying your bills on time. Timely payments that pay off your balance in full are vital to ensuring that you don’t damage your credit.

You could also get credit for paying monthly utility, steaming, and cell phone bills. Tools like Experian Booster can show positive payment history when you pay your bills on time.

Check credit score and reports

It’s crucial to get in the good habit of frequently checking your credit score and reports. Even if you think you have zero credit, you should review your credit reports to ensure there aren’t any errors.

There are three different credit bureaus: Experian, Equifax, and TransUnion. You have the right to check your credit reports from all three of them once a year for free. Take advantage of the opportunity to ensure that your credit report is accurate.

Need help with personal credit repair?

Whether you have zero credit or need to improve your credit score, Improve Credit LLC can provide you with a free analysis of your financial situation. Our consumer credit repair service offers a customized credit restoration plan to help you turn your finances around and save you money in the long term.