Building Credit from Scratch: Tips for First-Time Borrowers

Most of us are familiar with the pitfalls of a low credit score — lenders and landlords may reject applications or offer higher rates, utility companies may require a high deposit to start service. 

But what about having no credit score, or being “credit invisible” to national credit bureaus Experian, TransUnion and Equifax? 

The circumstances are different, but having no credit history can pose similar challenges, especially if you’re looking to open credit cards or apply for loans. So being proactive about improving your credit score is a good idea. Being proactive about building a credit history is too.  

Why would ‘no credit’ pose a problem?

When potential lenders, landlords, sometimes even employers and insurance companies pull your credit report, they’re essentially trying to gauge the financial risk of doing business with you.  

A higher score on the 300-to-850 scale points to a higher likelihood that you’ll pay off debts. A low score might mean past financial issues, like multiple debts that went to collection. (FICO, which creates the most widely used credit scores, generally considers 670 and above to be in the “good” range, 580 and below to be in the “poor” range.)  

No score? From a lender’s standpoint, the risk is a bit of a mystery. 

No credit score may mean you’ve never opened a credit card, taken out a loan, or established any borrowing and repaying patterns. That’s common for young professionals and students who’ve just turned 18 and hit the legal threshold for borrowing. But it’s not just a challenge for teens and 20-somethings. Recent immigrants may not have a personal credit history, and retirees who pay off debts and go more than six months without borrowing activity can go from “positive” to “unscorable” too. 

In books and movies, mystery is intriguing and fun. When it comes to credit, mystery often means you don’t qualify or aren’t approved.   

Kickstart your credit

If your credit report is looking bare, these are proven ways to build it up: 

Apply for a secured credit card 

Secured credit cards are a starting point because they remove the risk “mystery.” To open one, you make a deposit with the card issuer, and that becomes your credit limit. By using and consistently paying that card off, you establish a positive credit history without going into debt. (Merchants & Marine Bank offers multiple secured credit card options.) 

Apply for a student credit card 

If you’re a student, you may have access to credit cards designed specifically for your circumstances — typically, they have lower credit limits and the requirements for approval are more lenient. Just like a secured card, using a student credit card and paying it off on time builds positive credit. (We offer the College Real Rewards credit card, with no annual fee and opportunities for cash-back bonus points.) 

Ask someone to cosign  

Some financial institutions offer the option to apply for a loan or credit card alongside a family member or friend (with good credit) who cosigns or shares responsibility for the debt. An important thing to keep in mind: Missing payments or defaulting on debt affects your credit and the cosigner’s, so it’s key to stay current, for both of you. 

Put your bills on autopilot 

Payment history plays a role in your credit score, so establishing consistent, on-time payments puts you on the board in a positive way. This includes rent, utilities and other bills, and automatically scheduling your monthly payments can keep you from forgetting or falling behind. Merchants & Marine Bank has online Bill Pay with the flexibility to schedule one-time or recurring payments. 

If your income isn’t consistent enough to make automatic payments a dependable option, make a point of setting a firm schedule and paying all your bills on time the old-fashioned way. 

Keep up with your credit reports 

Tracking your progress is an important part of building up credit. By checking your credit report, you can see what’s affecting your score, positively and negatively, and make changes if you need to.  

All Americans are entitled to a free annual credit report from Equifax, Experian and TransUnion, through In 2023, though, that access is broader — you can get free credit reports every week, through December. 

Your community bank can help

If you need to build or rebuild your credit, our team can recommend products and approaches that fit your circumstances. Visit us at your nearest Merchants & Marine Bank location, or reach out to our community bankers online. We’d be happy to help.