How to Build Credit From Scratch - The Realistic Mama (2024)

Newly married, my husband and I went to a cellular store to sign up for a new phone plan but when we got there we found bad news: apparently our non-existent credit was going to cost a $500 deposit per phone! Before that moment I thought that no credit was the same as good credit but I couldn’t have been more wrong! After that we began searching for how to build credit from scratchbut we had no idea where to start. I so wish I would have known about Credit Karma™ {our sponsor}, I would have saved myself hours of research and countless mistakes! Now years later {yes, it took me years to find them} I am in love, if you stick around I’lltell you why and share what I’ve learned along the way including how to build credit from scratch. Something I definitely want to teach and help my kids with so they can be off to the best start.

How to Build Credit From Scratch

Here are all the things I’ve learned about building your credit score from scratch. Also the basics, I wish I would have known, to understanding credit, credit scores and why they matter. Because knowing the ins and outs of what you’re doing helps you to be able to make sure you achieve the best!

Why does your credit matter:

First of all, so you don’t have to pay outrageous deposits like above! I mean, it does makes sense that the companies want a deposit from those of us with no credit score, we are a big huge mystery on how much risk we are for them.

Obviously, credit also plays a role ingetting approved for loans. I’m not a huge fan of loans and I avoid them like a plague except maybe a home loan. Your credit also has an impact on the interest rate of that loan.

WhatI didn’t know about,was the factor your credit score plays in the cost of your insurance. So even if you plan to never, ever, take a loan you’ll still want to pay attention to your credit in order to save money on things like insurance. Something to think to think about, at the very least.

Whatto do if you have no credit:

Not to state the obvious but start building it as soon as you can!Your score is partially determined my how long you have had certain credit cards, credit limits, loans, etc. It’s going to take time so the sooner you start working on it the better.Even if it requires starting small, it’s something! Secured Credit Cards are a great option when starting out, you act as the creditor by providing the cash up front and then use the card as you would a credit card and then after some time you can switch the card over, get your deposit back and have your first official credit card. Or try applying for a less fancy credit card, possibly a student credit card, etc.Credit Karma™will have suggestions for you {or your grown kids} based on where you’re at and your likelihood to get accepted – a pretty nice feature, that once again, I wish I would have known about years ago! But here’s to teaching the next generation from our mistakes!

The magic number:

All this talk on having a good credit is great, but how do I know the difference between good and bad credit?

720 –The magic number to strive to pass that will help you qualify, get good interest rates, etc.

How to track & improve your credit score:

So knowing the number you want to shoot for is great but… how do you check yours and know if you are getting close?

I love Credit Karma™{and it’s free! and you don’t have to put any credit cards on file}! They have taken the guessing game out and put the facts together for me, it not only helps me know my score but helps teach me how to improve. They have some really fun features like a credit score simulator that will give you an idea of how certain decisions will affect you credit score, and more!

Does trackingyour credit score affect your credit?

Trust me, I had this same question! And for several years I never tracked my score cause I was afraid I would lower it by doing so. Again, I was wrong! There is a difference between YOU checking and monitoring your own score and a company/bank inquiring. When you monitor your score,it’s a soft inquire which does not affect your score, where as a company/bank inquire is a hard inquiry and it will have impact on your credit. This another feature onCredit Karma™, seeing how those hard inquires have affected your credit. These hard inquires shouldn’t scare you off, just make you think first, is it worth the benefit?

My last tips:

-Spend less than 15/25% off your credit limit on your card and pay it off in full each month.We use our cards for gas and sometimes grocery, with money that we have already budgeted in our acct. for those specific things and then when it comes time to pay our credit card each month we pay with the set aside money.

-Always pay on time.

-Take 5 minutes, sign up for Credit Karma™so you can know andmonitor your score.Remember it’s free!

-If you can’t handle the credit card, DON’T KEEP IT – don’t incur debt trying to build credit.

Have anything to add? What have you learned as you’ve went along?

This is a sponsored post written by me on behalf of the Credit Karma™. All opinions are still my own.

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