How to build your credit score and the best credit cards to apply for to do so

This blog focuses almost exclusively on earning points via credit cards, and most of the credit cards we recommend on here require pretty good credit scores in order to be approved. Well what if you’re not at that point yet? What if you are completely new to the credit card industry because either you’re young or you’ve never had a credit card before? Your credit scores probably aren’t amazing. Are you just outta luck?

Fear not, the answer is no. Well, you are out of luck for the moment. With little or no credit history you will most likely not be approved for these great travel credit cards we discuss. But you don’t have to be making six figures before you get a good credit score. Throughout college I had a 760+ credit score, and that was on a $0 income. Today I will discuss what it takes to get to a great credit score, and then what credit cards you should apply for to get you there. First, a discussion of credit scores.

What makes up my credit score?

There are six factors that make up your credit score. According to Credit Karma, these factors have various weightings on your score. These are the factors and their corresponding weights:

Credit Card Utilization – High

This is the amount of your total credit line that you use in a given month. If you have two credit cards each with a $10K credit line, then you have $20K in credit available. If you spend $1K on one card and $2K on another card, then you’ve got a 15% credit utilization [($1K + $2K)/$20K].

The lower your credit utilization the better. You can lower this in one of two ways, either spend less or get more credit. It’s hard to just start spending less if you only buy what you need, but what you can do is pay off your credit card more often than just once a month when your bill is due. Your credit card company will send the credit bureaus your statement usually at the same time it gets sent to you. So even if you are paying in full every month, your credit utilization might look high because the credit bureau receives your statement before you’ve paid it off. Make sure to pay early and often.

Payment History – High

This one might be pretty obvious. This is the percentage of your payments that were made on time. Basically this should always be 100%. If you happen to forget a payment once, usually your credit card company can forgive it if you’re a good customer. Just call them and ask if they can remove the derogatory mark from your credit score for not paying on time.

Age of Credit History – Medium

This is the average age of all of your loan accounts. The higher the better. Obviously there is not much you can do about this if your credit age is low. If your parents are timely bill payers though, you could ask them to add you as an authorized user on their credit cards. They don’t have to actually give you the credit card, but just adding you will put their credit card on your credit report, thus bumping your average age of accounts and also improving your credit utilization.

Total Accounts – Low

This is the number of loan accounts you have. The higher the better. Open more credit cards, this number improves.

Credit Inquiries – Low

Every time you apply for a credit card, at least one of your three credit bureau reports will receive a “hard inquiry”. This simply means that a credit issuer has checked your credit score. These inquiries stay on your score for two years, and the fewer you have of them, the better. What I’ve found is that credit card companies don’t really care about inquiries that are more than 90 days old. And if you have multiple inquiries to one bureau in one day, they are consolidated as just one inquiry. This is why you’ll see a lot of bloggers doing a number of credit card apps all at once every 91 days or so. In order to minimize your total credit inquiries, I recommend doing the same.

Derogatory Marks – High

If you go through bankruptcy or your credit card went unpaid for so long that it is in collections, you would get a derogatory mark on your credit score. Keep this number at zero or you probably won’t be approved for almost any credit cards.

Credit cards you might be eligible for

When my girlfriend was, thanks to me, just getting into the credit card game to help finance our long-distance relationship, she wasn’t approved for any of the travel credit cards she applied for. This is because she had no credit history. In order to build her history, we first had to get her some other credit cards that, even without any credit history, she was still eligible for. It is best to get credit cards with as many of the major credit card issuers as possible, as establishing relationships with them will be crucial for being approved for future cards. Here is a list of the cards she applied for and was approved for:

U.S. Bank College Visa

No annual fee

No rewards

Note that you don’t have to be a college student to apply for this card.

BankAmericard Cash Rewards

No annual fee

3% cash on gas, 2% on groceries, 1% on everything else

$100 bonus after $500 spend in 90 days

There are also other cards specifically designed for people with no credit history:

Capital One Cash Rewards for Newcomers

No annual fee

2% cash on travel, 1% on everything else

This card was designed for immigrants but anyone can apply.

Discover it for Students

No annual fee

5% cash in rotating categories, 1% on everything else

Again a card designed for students but all can apply.

What now?

Apply for as many of these cards as you feel comfortable. The more cards you have in your name, the better. Since none of these cards carry annual fees, you can keep them indefinitely and they will help build your credit age.

Do the applications all in one day to minimize your inquiries. If you aren’t approved, call up the reconsideration phone number and ask them to reconsider.

A few months down the road, with a bit of history on your credit score, you should be eligible for better cards. Just be patient and your score will shoot up quicker than you think.