Check out my article on the Best Do It All Credit Cards
Here are some ways to build a credit score for free starting from scratch:
- Get a secured credit card: A secured credit card is a type of credit card that is backed by a deposit. By using a secured credit card responsibly and paying the balance in full each month, you can build a positive credit history. When first starting out in the credit card world often a secured credit card is the only option. The Discover IT secured card one of the best secured cards out there.
- Become an authorized user: If you have a trusted family member or friend with good credit, you can become an authorized user on their credit card account. This allows you to build a credit history by using their account responsibly and making on-time payments.
- Pay bills on time: Late payments can have a negative impact on your credit score, so it’s important to pay all of your bills on time, including utility bills, rent, and other debts.
- Keep credit card balances low: High credit card balances can negatively impact your credit score, so it’s important to keep your credit card balances low and make payments on time.
- Check your credit report regularly: It’s important to regularly check your credit report for accuracy and to identify any errors or fraudulent activity. You are entitled to one free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) each year. You can request your free credit report at AnnualCreditReport.com. A much easier way to keep tabs on your credit report are free services like Credit Karma and Chase Credit Journey.
Building a credit score takes time and requires consistent responsible behavior with credit. By following these steps, you can begin building a positive credit history and increase your credit score over time, without incurring any fees.
Your credit score is calculated based on the following components:
- Payment History: This is the most important factor and accounts for 35% of a person’s credit score. It reflects a person’s record of paying their debts on time, including credit cards, loans, and other bills. Late payments and missed payments can have a negative impact on a person’s credit score.
- Credit Utilization: This factor accounts for 30% of a person’s credit score and reflects the amount of debt a person has relative to their credit limit. A high credit utilization rate, or the amount of credit being used relative to the credit limit, can have a negative impact on a person’s credit score.
- Length of Credit History: This factor accounts for 15% of a person’s credit score and reflects the length of time a person has had credit. A longer credit history can have a positive impact on a person’s credit score.
- Credit Mix: This factor accounts for 10% of a person’s credit score and reflects the variety of credit types in a person’s credit history, such as credit cards, loans, and mortgages. A diverse mix of credit types can have a positive impact on a person’s credit score.
- New Credit: This factor accounts for 10% of a person’s credit score and reflects the number of new credit accounts a person has opened and the frequency of credit inquiries. Too many new credit accounts in a short period of time or frequent credit inquiries can have a negative impact on a person’s credit score.
These five components are used to calculate a person’s credit score, with each component being assigned a weight based on its importance.
Check out my article on the Best Do It All Credit Cards
