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6 Ways To Build Your Credit From Scratch

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Find out how to build your credit from scratch with six resources that can help almost anyone establish a credit history.

6 Ways To Build Credit From Scratch

If you stop using credit long enough, you find yourself in a tricky situation. 

After paying off debt, some people eliminate credit from their lives. They stop using credit cards, taking out loans, or using any type of financing that requires a lender.

For some people, living a debt-free lifestyle can reduce stress and help them get their finances under control.

The problem is, when you stop using credit, you eventually become “credit invisible.”

Ending up with no credit rating and no way to prove that you’re responsible with money can result in businesses thinking that you’re untrustworthy.

Credit invisibility, or very low credit, can lead to several problems.

  • Problems renting a home or business property
  • Difficulty verifying your past to companies interested in hiring you (many run credit reports before they hire)
  • Unable to access the perks, rewards, and cashback bonuses that come with high-quality credit cards

Find out which credit cards offer the best perks and rewards:

Best personal credit card

Best business credit card

Best travel credit card

Minority Mindset thinkers view credit not as a way to buy things they can’t afford, but a way to prove trustworthiness, enjoy perks and rewards, and save money with lower interest rates.

If you find yourself with a very low credit score (or none at all), the solutions below will help you build credit from scratch and become visible to lenders, employers, business partners, and landlords.

Please note: Minority Mindset does not approve or disprove any of the resources below. We report on the latest credit-building techniques, but it’s your job to check the reputation, credibility, and legitimacy of the individual companies mentioned below.

Are You Invisible?

If you’re living in the financial shadows, without any credit or with very low credit, you’re not alone.

Forty-five million people worldwide don’t have access to affordable credit.

This lack of affordable credit results in 25% of families turning to shady financial services for help.

For example, payday lenders charge between 391% – 521% interest on loans. 

“Fringe” lenders such as payday loan lenders trap consumers into a vicious cycle of borrowing to meet their basic needs.

It’s hard to break out of the “invisible” cycle because who will lend you money or give you a credit card if you have no credit history?

Fortunately, there are several programs and services that can help people with no credit begin to build a good credit score.

Secured Credit Cards

A secured credit card requires a security deposit equal to the amount of your credit line. 

Legitimate cards such as Discover It and Capital One Secured Mastercard refund your security deposit over time, but be warned that interest rates are high.

An average secured credit card may charge 20 – 25% interest if you make payments instead of paying the full amount each month, and it will cost you even more in fines and fees if you make a late payment.

The good news is that you don’t have to pay interest on credit cards if you pay your balance in full at the end of each month.

A secured credit card is an excellent way to build good credit if you manage it responsibly. 

For example, the Discover It card reports to all three major credit bureaus. Eventually, it allows you to upgrade your card to a non-secured account (assuming an excellent payment history). 

To learn more about how to use credit cards to your benefit, including how much of your credit line you should use to improve your credit score, check out our guide to improving your credit here:

How to Improve Your Credit In 3 Simple Steps

Cash Score Credit

Cash score credit is lending based on your banking history instead of credit history. It’s a unique concept offered by Petal 1 that comes with mixed reviews.

Petal 1’s interest rates range from 20 – 29.5%, and it reports to all three credit agencies, so if you manage your card responsibly, it should help build your credit rating.

While several reviewers complain of poor customer service, others sing its praises, claiming that the card helps credit “invisibles” to build a good reputation with lenders.

Because lending criteria is based on your bank activity, you’re required to provide all of your private banking information to apply for the petal card. 

Thinking of starting a business? Find out which business credit cards Minority Mindset recommends here: The Best Business Credit Card

Credit Builder Loans

Credit builder loans are loans that do not require credit history but instead look at your income to ensure that you have enough money to make payments.

The catch is that you don’t receive the borrowed money until you pay off the loan. The money is kept in your lender’s account while you make monthly payments on the loan.

Credit builder loans can be a decent option to help people build credit, but keep in mind that if you don’t make payments on time, you’ll build a negative credit history (and defeat the purpose).

If you’re considering a credit builder loan, compare lenders to find one that reports to all three credit agencies. 

Although some credit builder loans may be available through online banks and credit unions, your best option for finding this type of loan is probably at your local community bank.

Passbook Loans

A passbook loan is a loan that’s secured by funds in your savings account. The lender (the bank where you have the savings) freezes those funds as collateral until the loan is paid back.

With a passbook loan, your funds continue to earn interest as they sit in your savings account.

Passbook loans, commonly referred to as “secured personal loans,” are typically low-interest loans offered by smaller banks.

If you’re interested in a passbook loan, talk to your bank or small local community banks.

Lending Circles

Lending circles are groups of 6 – 12 people who lend each other money through a service such as the Mission Asset Fund.

In a lending circle, a new member of the group receives a loan (usually between $300 – $1,200) each month until everyone in the group has borrowed money.

Its lending circle reports to all three credit agencies to help build your credit, and Mission Asset ensures that all your information is encrypted, secure, and private. 

Mission Asset Fund specializes in helping low-income families, marginalized communities, and immigrants secure loans with zero percent interest. 

If you’re stuck in the financial shadows and need help building credit, joining a lending circle may help you build a positive lending history.

Credit For Bill Paying

Programs such as Experian Boost, Rental Karma, and eCredible help you get credit for on-time bill payments for things that you’re already paying, including:

  • Netflix
  • Phone
  • Utilities
  • Rent

If you pay all of your bills on time – every time — this may be an option to help you build credit.

Before you enroll, research various programs to determine which agencies they report to and how much difference it can make on your credit rating. 

Keep in mind that if you fall behind on your bills, these services can hurt your credit instead of helping it, so use caution when signing up for services that offer credit for your monthly rent and utility bills.

Managing Credit Responsibly And Building Your Score

Credit scores reflect how well you manage money and pay your debts. You have to do an outstanding job of paying everything on time — all the time — to build good credit.

Earn money every time you spend! See Minority Mindset’s pick for:


The resources listed above aren’t the only ways to build credit. For example, you can have someone add you to their credit card account, get a cosigned loan, or apply for credit in countries with lower credit requirements.

If you’re ready to build good credit, though, you’ll skip the shortcuts work to build credit the responsible way.

People with no credit or very low credit scores don’t have to remain financially invisible. 

Instead, consider building credit from scratch using secured credit cards or loans, joining a lending circle, or getting credit for the bills you already pay each month.

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Written by Minority Mindset Team

The Minority Mindset has nothing to do with the way you look, your ethnicity, or your skin color. It’s a mindset. #RethinkRich

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