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How to Build Your Credit From Scratch

Building credit can be intimidating if you’re just starting out. But with a little bit of knowledge and effort, you can start building credit from scratch and set yourself up for a bright financial future.

Without a solid credit history, it can be difficult to qualify for loans, credit cards, other financial products, and even renting a place to live.

In this article, you’ll understand what a credit score is and how it’s calculated, how to establish your credit, manage credit, and maintain good credit.

Understanding Credit Scores

Your credit score is a numerical representation of your creditworthiness. It’s based on several factors, including your payment history, credit utilization, length of credit history, and types of credit accounts you have. Credit scores range from 300 to 900.

Before you start building credit, it’s important to check your credit score and make sure there are no errors or fraudulent accounts on your report.

You can get a free credit report from each of the major credit bureaus, including Equifax and TransUnion. Many Canadian banks also offer free credit reports for their clients through one of the bureaus.

Establishing Credit History

One of the biggest challenges young adults face when it comes to building credit is that they don’t have a credit history yet. This can make it difficult to get approved for credit cards or loans. But there are several strategies you can use to establish credit history, even if you’re starting from scratch:

  1. Apply for a secured credit card: A secured credit card requires you to put down a deposit, which becomes your credit limit. This can be a good option for people with no credit history since it minimizes the risk to the lender.

  2. Become an authorized user: If you have a friend or family member with a credit card in good standing, you can ask them to add you as an authorized user. This can help you build credit without taking on any debt of your own.

  3. Take out a credit-builder loan: Some lenders offer loans specifically designed to help people build credit. These loans typically are secured by a savings account. KOHO is a Canadian company that offers a credit builder, and you can sign up for free using this affiliate link.

Managing Credit Responsibly

Once you have credit accounts in your name, it's important to use them responsibly. Managing your credit responsibly is the one thing you can do to build your credit score:

  1. Pay your bills on time: Late payments can have a significant negative impact on your credit score. It shows potential lenders that you can't be trusted to make your payments on time. Set up automatic payments or reminders to help you stay on track.

  2. Keep your credit utilization low: Your credit utilization ratio is the amount of credit you're using compared to your credit limit. Ideally, you should keep your utilization below 30%.

  3. Avoid applying for too much credit at once: Each time you apply for credit, it can have a small negative impact on your credit score. Try to limit your applications to only the ones you really need.

  4. Pay off credit card balances every month: This not only shows that you are able to use credit responsibly, but it will save you a lot of interest each month. Make sure you have the money available whenever you use your credit card.

  5. DO NOT apply for more credit if you are carrying a balance on an existing card: Pay off existing balances before applying for more credit cards.

Maintaining Good Credit

Building good credit takes time, but it’s worth it in the long run. Here are some tips for maintaining good credit:

  1. Monitor your credit report: Make sure to regularly review your credit report to check for errors or fraudulent activity. If you notice any errors, you can dispute them with the credit bureaus to have them corrected.

  2. Use credit wisely: Only use credit for purchases that you can afford to pay off in full each month. Avoid using credit to make impulse purchases or to cover everyday expenses.

  3. Keep old credit accounts open: The length of your credit history is an important factor in your credit score. If you have a credit card or loan that you’ve had for a long time and are in good standing, keep it open to help boost your credit score.

  4. Stay motivated: Building credit can be a slow process, but it’s important to stay motivated. Remember that every responsible payment you make is a step in the right direction, and that building good credit now will pay off in the future.


In summary, building credit is an important step in establishing financial stability and independence. It may take time and effort, but it's worth it in the long run.

Start building your credit today by checking your credit score and establishing credit accounts that you can manage responsibly.

Remember to use your credit wisely, pay your bills on time, and keep your credit utilization low. With patience and perseverance, you can establish a solid credit history and achieve your financial goals.

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