How to build credit from scratch with your first credit card

To build credit from scratch, you need at least one account that gets reported to the credit bureaus, paid on time, with low balances, for long enough to be scored. For a FICO Score, that means at least six months.

A first credit card is the most common way to get there. Here's what the scoring models look at and how to set up that first card so it works for you instead of against you.

What it takes to get your first FICO Score

myFICO lists three minimum requirements. Your credit report must have:

1. At least one account opened for six months or more.
2. At least one account reported to a credit bureau within the past six months.
3. No indication that you are deceased.

One account can meet all three. So the clock starts when your first card is opened and reported, and patience is part of the plan.

The five FICO factors and their weights

According to myFICO, FICO Scores group credit report data into five categories:

myFICO says these weights show how important each category generally is, and their importance can vary from person to person. It also says your score doesn't consider your income, age or where you live, though lenders may weigh some of those when deciding on an application.

For a beginner, two factors, payment history and amounts owed, make up 65% of the score. Those are the two you control every month.

Utilization: the number you control monthly

Credit utilization is the share of your available credit you're using. myFICO calls it an important factor, and adds that a low utilization ratio can sometimes help more than not using your credit at all.

There's a timing detail most beginners miss. myFICO says the balance on your credit report is typically the one from your latest statement. So even if you pay in full each month, your report may show a balance.

Say your first card has a $500 limit (an example):

• You charge $250 during the month. If the statement shows $250, your utilization is 50%.
• If you pay $210 before the statement closes, the statement shows $40, or 8%.

The CFPB says some experts advise using no more than 30 percent of your total credit limit, and others say to stay below 10 percent. Then pay the statement balance in full to avoid interest.

On-time payments: the biggest factor

Payment history is 35% of a FICO Score. The CFPB defines "on time" as the payment reaching the company by the day the bill is due, so if you pay by mail, send it a few days early.

Two habits cover most of the risk:

• Autopay for at least the minimum. It's a safety net if you forget.
• A calendar reminder to pay the full statement balance. That keeps interest at zero.

myFICO notes that one or two late payments aren't an automatic score-killer when the rest of your history is strong. With a brand-new file, though, there's little else on your report to outweigh them.

Your first-card options

Student cards

Student cards are a category built for people with little or no credit. Experian explains that they typically have lower credit limits, possibly as low as $500, often no annual fee, and some waive the first late fee. Some don't require a credit score at all.

You'll usually need to show that you attend a two- or four-year college or have been admitted and will start soon. Age matters too. Experian explains that under the Credit CARD Act of 2009, applicants aged 18 to 21 need to show independent income or use a cosigner to get a credit card. It also notes that cosigners are no longer common, but student cards often accept other income sources, such as grants, scholarships or a regular allowance from parents.

Secured cards

A secured card asks for a cash deposit that usually becomes your credit limit. Because the deposit lowers the issuer's risk, it can be easier to get than a student card. Our secured card guide in the building credit section covers deposits, fees and upgrading.

Becoming an authorized user

You can also start with someone else's card. Experian says authorized users get a card in their name, and the account's credit limit and payment history appear on their credit report, while the primary cardholder alone is responsible for paying the bill.

The catch: the primary cardholder's habits become part of your file. Experian says this works best when that person has a strong credit history and the issuer reports to all three bureaus (Experian, TransUnion and Equifax). Late payments or high balances on their account can hurt you. It's a good start, but it doesn't replace an account in your own name.

A simple first-year plan

1. Pick one card type that fits your situation and apply for just one card. New credit is 10% of your score.
2. Put one or two small, predictable bills on it.
3. Set autopay for the minimum and pay the full statement balance every month.
4. Keep the statement balance under 30% of your limit, lower if you can.
5. Check your credit reports to confirm the account is being reported.
6. After about six months, check whether you have a FICO Score. Keep the card open as your oldest account.

Rewards can wait. Once you have a year of clean history, cards like no annual fee cards with better terms become easier to qualify for.

Bottom line

Building credit from scratch is slow but simple: one reported card, small balances, every payment on time, and at least six months of patience. Student cards, secured cards and authorized user status are all workable first steps. The habits matter more than the card.