To build credit from nothing, open one or two accounts that report to the three nationwide credit bureaus, use them lightly, and pay on time every month. The usual starting points are a secured credit card, a credit-builder loan from a bank or credit union, or becoming an authorized user on a trusted person’s card. Debit cards, prepaid cards and payday loans do not build credit, because those payments are not reported as credit history (CFPB, as of Oct 2026).
Key takeaways
- About 2.7% of US adults, roughly 7.0 million people, had no credit record at all in December 2020, according to a corrected 2025 CFPB estimate. Many more have a record too thin to score.
- A secured card with no annual fee, paid in full each month, can build history at no cost beyond the refundable deposit.
- An EarlyPayoff example shows a $1,000 credit-builder loan at an assumed 12% APR over 12 months costs about $66.19 in interest, and you get the $1,000 back at the end.
- If you are under 21, a card issuer generally needs proof that you can make the payments on your own income, or a cosigner aged 21 or older (Regulation Z, as of Oct 2026).
- Your first credit record should show on-time payments, not a collection. Unpaid medical, cable and phone bills sent to collections are a common way people become “credit visible” in the wrong direction (CFPB research).
Why starting from zero is hard, and how people get out
Lenders use credit reports and scores to decide whether to lend and at what rate. Landlords and insurers often check them too (CFPB, as of Oct 2026). With no history, you may be denied or charged more, even if you have always paid your bills in cash.
There are two separate problems. Some people are “credit invisible,” with no credit record at any of the bureaus. Others have a record but too little recent activity for a score. In June 2025 the CFPB corrected its long-cited estimate. The share of adults with no credit record in December 2010 was cut from 11.0% to 5.8%, and by December 2020 it had fallen to 2.7% (7.0 million people). Another large group had records that a common scoring model could not score (CFPB, as of Oct 2026).
CFPB research on how people first become credit visible found that nearly 80% of those transitions happen before age 25. Credit cards were the most common first account. About 15% of people opened their first account with a co-borrower, and another 9.6% got their first record by becoming an authorized user (CFPB, 2017).
Your options, compared
| Option | Upfront money | Typical cost | Speed to build history | Main risk |
|---|---|---|---|---|
| Secured credit card | Refundable deposit, often equal to the limit | $0 if no annual fee and paid in full | Starts once the first statement is reported | Fees on some cards; interest if you carry a balance |
| Credit-builder loan | Usually none; you repay before you receive the money | Interest and any fees; $66.19 on $1,000 over 12 months at 12% | Builds history over the 6- to 24-month term | Missed payments get reported too |
| Authorized user | None | Usually $0 | Can appear on your report quickly if the issuer reports authorized users | Primary cardholder’s late payments or high balances can show up for you |
| Student or starter card (unsecured) | None | $0 if paid in full | Starts once the first statement is reported | Hard to qualify with no history; under-21 income rules apply |
| Cosigned loan or joint account | Depends on loan | Loan interest | Builds as payments are reported | The cosigner is fully on the hook |
| Rent or utility reporting | None | Service fees vary | Depends on whether and to which bureaus it is reported | Late payments can hurt; not every score uses this data |
Option 1: A secured credit card
You put down a cash deposit, for example $500, and get a card with a limit about equal to it. When you pay the bill, your available credit is restored (CFPB, as of Oct 2026). Because it is a real credit card, the issuer reports it like any other card. Ask the issuer to confirm it reports to all three nationwide bureaus.
How to use it so it builds credit and costs nothing:
- Pick a card with no annual fee if you can. A $49 annual fee, for example, is $49 a year spent only to build credit.
- Put one small, regular bill on it, such as a streaming service or a phone plan.
- Keep the reported balance low. Charging $50 a month on a $500 limit means 10% utilization. Our guide on improving your credit utilization explains why a lower reported balance helps.
- Pay the full statement balance automatically every month. Carrying even $400 for a year at the 22.15% average card rate (Federal Reserve G.19, 2026 Q2) costs about $88.60 in interest.
Ask how and when the issuer reviews secured accounts for a deposit refund or a move to an unsecured card. Policies vary by issuer.
Option 2: A credit-builder loan
A credit-builder loan works in reverse. The lender sets aside the loan amount, typically $300 to $1,000, in a locked account. You make the payments, usually over 6 to 24 months, and get the money once the loan is paid off. Your payments are reported to the credit bureaus as you go (CFPB, as of Oct 2026). These loans are often offered by credit unions, community banks and nonprofit lenders.
The cost depends on the rate and fees. At an assumed 12% APR:
- $500 over 6 months: $86.27 a month, $17.65 in interest.
- $1,000 over 12 months: $88.85 a month, $66.19 in interest.
- $1,000 over 24 months: $47.07 a month, $129.76 in interest.
The evidence is encouraging, with a catch. In a CFPB study of 1,531 credit union members, a credit-builder loan raised the chance of having a credit score by 24% for people who had no existing loan. People without existing debt saw their scores rise 60 points more than people who already had debt. The loan was also linked to $253 more in savings on average. But people who already carried other loans saw scores dip slightly, which suggests the extra payment strained their budgets (CFPB, 2020).
Pick a payment you can make easily every month. A late payment on a loan meant to build credit does the opposite.
Option 3: Become an authorized user
A parent, partner or other trusted person can add you as an authorized user on their credit card. If the issuer reports authorized users, the account’s history may show up on your credit report.
It works only if the primary cardholder pays on time and keeps the balance low, because their missed payments or high balances can show up on your report too. As an authorized user you generally are not responsible for repaying the debt, and card issuers usually report authorized-user status to the bureaus (CFPB, as of Oct 2026). Some lenders and scoring models may give these accounts less weight than accounts in your own name. Treat it as a head start, and add an account in your own name when you can.
Rent, utilities and other bills
Paying rent, utilities and phone bills on time usually does not show up on your credit reports on its own, but failing to pay can. The CFPB found that most first-time credit records created from non-loan items, such as collections, carried negative information (CFPB, 2017).
Some landlords take part in rent reporting programs that send on-time payments to the bureaus. The CFPB suggests asking your landlord, and watching for fees charged by these services (CFPB, as of Oct 2026). Not every credit score uses rent data, so treat rent reporting as an extra, not your only plan.
Rules if you are under 21 or a student
The CARD Act rules in Regulation Z protect young adults:
- A card issuer cannot open a credit card account for someone under 21 unless the applicant shows an independent ability to make the minimum payments, or a cosigner, guarantor or joint applicant aged 21 or older agrees to be liable and can pay (12 CFR 1026.51(b), as of Oct 2026).
- Before 21, the credit limit generally cannot be raised unless you can show you can afford the higher limit, or your cosigner agrees in writing.
- Card issuers cannot offer college students free gifts or other tangible items on or near campus, or at school-related events, to get them to apply for a card (12 CFR 1026.57, as of Oct 2026).
The CFPB notes that age generally cannot be used against you in lending decisions, but the under-21 credit card rule is an exception set by federal law (CFPB, as of Oct 2026). Federal student loans can also create a credit record, but borrowing for that reason makes no sense.
How long it takes
You will not have history until an account is open and the lender reports it, usually after your first statement or payment. Most scoring models also need some minimum amount of history before they can produce a score. The exact rule depends on the model, so expect several months rather than weeks.
Check your progress for free. You can get your credit reports from each nationwide bureau every week at AnnualCreditReport.com, and you should dispute any errors you find (CFPB, as of Oct 2026).
When these strategies are a bad idea
- Do not pay for “credit repair” or “credit building” packages that promise fast results. Nobody can remove accurate negative information, and you can dispute errors yourself for free (CFPB, as of Oct 2026).
- Do not use payday loans or “buy here, pay here” car loans to build credit. Payday loans generally are not reported, and some of these dealers report only late payments (CFPB, as of Oct 2026).
- Do not open several accounts at once. Each application can show up as a new inquiry, and several new accounts are harder to manage.
- Be careful with cosigning arrangements. A cosigner who pays late damages both of your credit records, and a relationship strain is a real cost.
- Watch fees on starter cards. Federal rules generally cap required fees in the first year at 25% of the initial credit limit, for example $75 on a $300 limit. Late, over-limit and returned-payment fees do not count toward that cap (12 CFR 1026.52(a), as of Oct 2026). A card that uses up the cap is still expensive.
Build the payments into your monthly plan so they never slip. See how to build a budget that works. Once you have a year or two of history, the same habits help you qualify for bigger goals. See how to raise your credit score before buying a home.
Frequently asked questions
What is the fastest way to build credit from nothing?
Opening a secured card or a credit-builder loan that reports to all three bureaus, and paying on time, is the most reliable route. Becoming an authorized user on a well-managed card can add history quickly, but how much it helps depends on the issuer and the scoring model.
Does a debit card or prepaid card build credit?
No. You are spending your own money, not borrowing, so those payments are not reported as credit history. A secured card looks similar but is a real credit account, so it does report.
Can I get a credit card at 18?
Yes, if you can show your own income or assets are enough to make the minimum payments, or if a cosigner aged 21 or older agrees to be liable. Without either, issuers generally cannot open the account until you turn 21.
Will a credit-builder loan hurt my score?
It can if you miss payments. CFPB research found that people who already had other loans saw a small average score decline, likely because the extra payment was hard to manage. Choose an amount and term with a payment that fits your budget.
How do I check whether my new account is being reported?
Get your free credit reports at AnnualCreditReport.com a month or two after you open the account. If it does not appear at any of the bureaus, ask the lender which bureaus it reports to.
Sources
- CFPB, What are some ways to start or rebuild a good credit history?, accessed Oct 2026
- CFPB, How do I get and keep a good credit score?, accessed Oct 2026
- CFPB, Technical correction and update to the CFPB’s credit invisibles estimate (June 2025), accessed Oct 2026
- CFPB, Data Point: Becoming Credit Visible (June 2017), accessed Oct 2026
- CFPB, Targeting Credit Builder Loans (July 2020), accessed Oct 2026
- CFPB, Study shows financial product could help consumers build credit (July 2020), accessed Oct 2026
- CFPB, Can a credit card company consider my age when deciding to lend me a card?, accessed Oct 2026
- CFPB, Authorized user on a deceased relative’s card: liability for the debt, accessed Oct 2026
- CFPB, Does late rent affect my credit score?, accessed Oct 2026
- CFPB, How do I get a free copy of my credit reports?, accessed Oct 2026
- CFPB, How long does information stay on my credit report?, accessed Oct 2026
- eCFR, 12 CFR 1026.51 (rules affecting young consumers), accessed Oct 2026
- eCFR, 12 CFR 1026.52 (limitations on fees), accessed Oct 2026
- eCFR, 12 CFR 1026.57 (college student credit cards), accessed Oct 2026
- Federal Reserve, Consumer Credit – G.19 (released Oct 7, 2026), accessed Oct 2026
This article is general education, not individualized financial, tax or legal advice.
