Skip nav to main content.

How to Build Credit When You Are Just Starting Out

If you have never had a loan or a credit card, you do not have a low credit score. You have no credit score at all. Lenders call this being credit invisible, and millions of adults in the United States are in exactly that position.

It is a frustrating place to start, because most of the ways to build credit assume you already have some. This guide walks through how to get from nothing to an established credit history, what each step involves, and roughly how long it takes.

What a credit score actually is

A credit score is a number between 300 and 850 that predicts how likely you are to repay borrowed money on time. It is calculated from the information in your credit report, which is a record of your borrowing kept by three national credit bureaus: Equifax, Experian and TransUnion.

You do not have one score. You have several, because each bureau holds slightly different information and there is more than one scoring model. This is normal and not worth worrying about. The habits that move one score move all of them.

The five things that build a score

Not everything counts equally. In most scoring models the weighting works out roughly like this.

Payment history, about 35 percent

Whether you pay on time. This is the single largest factor, and it is the one you have the most direct control over. One payment that reaches 30 days late can affect your score for years.

Amounts owed, about 30 percent

How much of your available credit you are using. If you have a card with a $1,000 limit and a $900 balance, you are using 90 percent of it, and that reads as strain. Under 30 percent is a common rule of thumb, and lower is better.

Length of credit history, about 15 percent

How long your accounts have been open. This is the factor that rewards patience and nothing else, which is why opening your first account earlier rather than later genuinely helps.

Credit mix, about 10 percent

Whether you have handled more than one type of credit. An installment loan, which is a fixed amount repaid over a set term, counts differently from a revolving credit card.

New credit, about 10 percent

How many accounts you have opened recently. Several applications in a short period can look like distress.

Where to start when you have no history at all

The order matters. Each step makes the next one easier.

Step one: open a checking account

A checking account is not itself a credit product and will not build your score directly. It matters because it establishes a banking relationship, gives you somewhere for direct deposit to land, and is usually a prerequisite for the products that do build credit.

If you are worried about overdrafting while you learn, a checkless account that does not allow overdrafts is a sensible first account. Zing’s Clear Card works this way. It has no monthly fee, no minimum balance, and no overdraft or nonsufficient funds fees, and it gives you access to 30,000 fee-free ATMs nationwide and 5,000 shared branches through the CO-OP network.

If you are opening an account for someone younger, Zing’s youth savings accounts cover ages 0 to 12 and ages 13 to 18 and open with $5.

Step two: consider a credit builder loan

This is the step most people do not know exists, and for someone with no credit history it is usually the most direct route.

A credit builder loan works backwards compared to a normal loan. You do not receive money at the start. Instead you make fixed monthly payments for the length of the term, those payments are reported to the credit bureaus, and at the end of the term you receive the principal you have paid in.

So it builds two things at once: a record of on-time payments, and a small amount of savings you did not have before.

The reason it works for people with no history is that the lender is not taking the same risk. Because you receive the money at the end rather than the beginning, approval usually does not depend on an existing credit score.

Step three: add a credit card, carefully

Once you have several months of on-time payments recorded, a credit card adds the revolving credit that a score wants to see.

The discipline that matters here is simple and worth stating plainly: use it for something small and predictable, and pay the statement balance in full every month. A card you never use builds very little. A card you carry a balance on costs you interest and can hurt the amounts-owed factor.

How a Zing credit builder loan works

Zing offers a credit builder loan with two options. One leaves you with approximately $500 at the end of the loan and the other approximately $1,000. The exact amount depends on your interest rate and loan payment.

Two features make it accessible to someone starting from nothing:

•  No credit check is required. It does not matter if you have no credit or bad credit.

•  No collateral is needed. You do not need any money up front to secure the loan. All that is required is your monthly on-time payment.

Your payments are reported to the credit bureaus, which may help improve your credit. Use of the loan does not guarantee a positive impact on your credit.

The funds are held for the term of the loan and released to you once it is paid off. You keep the principal you have paid in. It is worth being clear that you do not get money upfront with this loan, because that is the part people most often misunderstand.

For the current payment options, loan term, interest rate and fees, see Zing’s credit builder loan page and Zing’s current rates and fees.

How long each step takes

Building credit is slow in a way that is genuinely difficult to accept when you are in the middle of it.

•  One to two months: your first account appears on your credit report

•  Three to six months: enough payment history exists for a score to be generated at all

•  Six to twelve months: a consistent record of on-time payments starts to produce a usable score

•  Two years and beyond: length of history begins working in your favor

Nothing legitimate accelerates this meaningfully. Any service promising to fix or build your credit in days is either describing something you can do yourself for free or is not being straight with you.

Mistakes that set people back

Applying for several products at once. Each application can leave a mark. Space them out.

Closing your oldest account. It shortens your length of history, which is the one factor you cannot rebuild quickly. Usually better to keep it open and use it occasionally.

Paying only the minimum on a card. It keeps the account current, which helps payment history, but leaves a balance that works against the amounts-owed factor and costs interest.

Missing a payment by a few days. Most lenders report at 30 days, so a payment that is a week late usually does not reach your report. Do not rely on this. Set up automatic payments.

Assuming no debt means good credit. Having never borrowed produces no score, not a good one. This is the trap that catches most people who did everything else right.

Frequently asked questions

Can I get a credit builder loan at 18?

Generally yes. Because approval does not depend on an existing credit score, age and eligibility for membership are usually the practical requirements rather than credit history.

Does a credit builder loan hurt my credit score?

Not if you pay on time. The loan is designed to add positive payment history. Missed payments are reported the same way they would be on any other loan, so the risk is the same discipline required of any credit product.

How soon will I see a change in my score?

Most people see a score generated within three to six months of their first reported account, and a usable score within six to twelve months of consistent on-time payments.

Do I need to be a member to open one?

Yes. Zing membership is open to people who live or work in Denver, Adams, Arapahoe or Jefferson County, to family members of existing members, and to those who qualify through the Friends of the Gowest Foundation. Membership is established with a $5 deposit into a Share Savings account, which represents your ownership stake in the credit union.

What is the difference between a credit builder loan and a secured credit card?

A credit builder loan is installment credit repaid over a fixed term. A secured credit card is revolving credit backed by a deposit you place upfront. Both build history. The loan adds installment credit to your mix, and it does not require you to have the deposit money available at the start.

Will checking my own credit score lower it?

No. Checking your own report is a soft inquiry and has no effect on your score. You are entitled to a free report from each of the three bureaus.

Your first step

If you are beginning from nothing, the sequence that works is a checking account first, a credit builder loan second, and a credit card once you have a few months of payment history behind you.

Zing Credit Union has served Denver since 1934 as a member-owned, not-for-profit financial cooperative. If you want to talk through which step makes sense for your situation, that conversation is free and does not require you to open anything.

Loans subject to approval. Rates and terms are subject to change. Membership eligibility required. Federally Insured by the National Credit Union Administration.

Get the App

Download on the App Store

Get it on Google Play

TRUTH IN SAVINGS DISCLOSURE

Except as specifically described, the following disclosures apply to all the accounts.

  1. Rate Information. The dividend rate, or interest rate, and annual percentage yield on your accounts are set forth on the reverse side. The annual percentage yield is a percentage rate that reflects the total amount of dividends/interest to be paid on an account based on the dividend/interest rate and frequency of compounding for an annual period. For Certificates of Deposit and IRA Certificates of Deposit, the interest rate and annual percentage yield are fixed and will be in effect for the term of the account.  The annual percentage yield is based on an assumption that interest will remain on deposit until maturity.  A withdrawal will reduce earnings.
  2. Nature of Dividends. Dividends are paid from current income and available earnings after providing for the required reserves.  The dividend rates and annual percentage yields are the prospective rates and yields that the Credit Union anticipates paying for the applicable dividend period.
  3. Compounding and Crediting. Interest and dividends will be compounded and credited as set forth on the reverse side.  The dividend/interest period for each account is also set forth on our Rate and Fee Schedule.  The dividend/interest period begins on the first calendar day of the period and ends on the last calendar day of the period.
  4. Balance Information. The minimum balance required to open each account is set forth.  Interest is calculated by the daily balance method which applies a daily periodic rate to the principal in the account each day.
  5. Accrual of Dividends. Dividends will begin to accrue on cash deposits on the business day you make the deposit to your account.  Dividends will begin to accrue on noncash deposits (checks) on the business day you make the deposit to your account.  If you close your account before accrued dividends are credited, accrued dividends will not be paid.
  6. Account Limitations. The account limitations for each account are set forth in our Membership and Account Agreement
  7. Your account will mature on the maturity date set forth on your account receipt or renewal notice.
  8. Early Withdrawal Penalties. A penalty may be imposed if you withdraw any of the certificate funds before the maturity date or the renewal date, if this is a renewal account.
  9. Amount of Penalty. For Certificates of Deposit and IRA Certificates of Deposit the amount of the early withdrawal penalty for your account is 90 days’ interest for a term of 12 months or less, and 180 days’ interest for a term over 12 months.
  10. How the Penalty Works. The penalty is calculated as a forfeiture of part or all of the interest that have been earned on the account.  This penalty applies to earned interest and principal.
  11. Renewal Policy. Certificate of Deposit accounts will automatically renew for another term upon maturity.  You have a grace period of seven days in which to change or withdraw the funds without being charged an early withdrawal penalty.
  12. Exception to Early Withdrawal Penalties. At our option, we may redeem the account before maturity without imposing an early withdrawal penalty under the following circumstances:
    • When an account owner dies
    • or is determined legally incompetent by a court
    • or other body of competent jurisdiction.
  13. Nontransferable / Nonnegotiable. Your account is nontransferable and nonnegotiable.  The funds in your account may not be pledged to secure any obligation of an owner except obligations with the Credit Union.
  14. FEES FOR OVERDRAWN ACCOUNTS. Fees may be imposed on each check, draft item, ATM card withdrawal, debit card withdrawal, debit card point of purchase, preauthorized automatic debit, telephone initiated withdrawal or any other electronic withdrawal or transfer transaction that is drawn on an insufficient available account balance.  The entire balance in your account may not be available for withdrawal, transfer or payment of a check, draft or item.  You may consult the Funds Availability Policy for information regarding the availability of funds in your account.  Fees for overdrawing your account may be imposed for each overdraft, item or transaction.  If we have approved an overdraft protection limit for your account, such fees may reduce your approval limit.  Please refer to the Rate and Fee Schedule for current fee information.

Leaving Our Website

You are leaving Zing Credit Union’s website. Zing does not control this site and is not responsible for the content, products, or services available on the linked site. The credit union does not represent the third party or the member, if the two enter a transaction. The privacy and security policies of this linked site may differ from our own.

Press “Continue” to proceed, or press “Stay on This Page” to remain here.

Log in to Online Banking

Also of Interest

Veterans Day All branches and drive-thru locations will be closed on Wednesday, November 11th in observance of Veterans Day.