People often ask us, "How do I get a credit score?" If you do not have a credit score, building one is fairly easy. Here's the basics to building a credit score.
To start building a credit score, you need three things: One trade line + 6 months payment history + activity in the last 6 months.
One Trade Line
A trade line is a credit account record that is provided to credit reporting organizations. A trade line can include a mortgage, line of credit, credit card, auto loan, home equity loan or any other credit-related item that is provided by a financial institution or lender. When building a credit score, I recommend applying for a credit card with a manageable limit. Often, $500-$1,000 is plenty.
Payment History of at Least Six Months
To build a payment history, begin charging items that you know you can pay off, like gas or groceries, and make sure you make on-time payments, and ideally, pay off the balance each month consecutively for six or more months.
Activity Reported in the Last Six Months
It is important to have activity on your trade line(s). This doesn't mean that you have to use your credit card every day, but use it enough in a six month period to build a history of usage. This will show future lenders that you know how to manage making payments over a period of time.
Starting to build a credit score is easy to do. It only take one trade-line, like a credit card, and then at least six months of usage and payments. Once you have a credit score it is important to monitor your score regularly by taking advantage of your annual free credit report.