Credit Reports and Credit Scores · Lesson 2 of 3
Build Credit from Zero
A month-by-month plan to earn a first credit score, with costs compared, for newcomers, young adults, ITIN holders and anyone without a credit history.
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Parts of this lesson are not translated into your language yet, so they are shown in English.
In this lesson
What you will learn
- Explain what credit invisible means and why it matters for renting, jobs and loans.
- Compare secured cards, credit-builder loans, authorized user accounts, lending circles and rent reporting.
- Describe how to apply for credit with an ITIN at lenders that accept one.
- Follow a month-by-month plan to earn a first credit score.
How this connects to class: In class you learned that you can build credit with tools like secured cards and alternative credit history. This lesson gives you a month-by-month plan, a cost comparison with real numbers, and steps for newcomers and ITIN holders.
Words to know
- Credit invisible
- Having no credit history at any of the three nationwide credit bureaus.
- Thin file
- A credit report with very few accounts. It may be too small to produce a credit score.
- Secured credit card
- A credit card that needs a cash deposit. The deposit usually sets your credit limit.
- Credit-builder loan
- A small loan that is held in a locked savings account while you make payments. You get the money at the end.
- Authorized user
- A person who is allowed to use someone else's credit card. An authorized user is generally not responsible for paying the bill.
- ITIN
- Individual Taxpayer Identification Number. A 9-digit tax number from the IRS for people who cannot get a Social Security number.
No credit is not bad credit, but it can cost you
If none of the three nationwide credit bureaus has a file on you, you are credit invisible. If your file has only one or two new accounts, you may have a thin file, which can be too small to produce a score. Many people are in this group: newcomers to the United States, young adults, and people who pay for everything in cash.
Having no score is not the same as having a bad score. But it can still cost you money:
- Loans and cards: Lenders may turn you down or charge you a higher interest rate.
- Housing: Landlords may check your credit before they rent to you.
- Jobs: Some employers check credit. In DC, most employers may not ask for or use your credit information when they make job decisions, with some exceptions. You can report a violation to the DC Office of Human Rights.
Some good habits you already have may not count. Rent, phone and utility payments usually do not appear on credit reports unless the company reports them. Debit cards and prepaid cards do not build credit, because you are not borrowing money. Payday loans do not help either, because the payments are not reported to the credit bureaus. Car dealers that lend their own money (sometimes called buy here, pay here) often report only late payments, not on-time payments.
Five ways to start, compared
You only need one or two of these tools. Pick one that fits your budget and that reports your payments to the credit bureaus.
| Tool | How it works | Watch for |
|---|---|---|
| Secured credit card | You pay a cash deposit, for example $300. The deposit usually becomes your credit limit. You use the card and pay the bill. You get the deposit back when you close the account and owe nothing, or when you move to a regular card. | Yearly or monthly fees. Ask if it reports to all three bureaus and if you can later move to a regular card. |
| Credit-builder loan | Often from a credit union or nonprofit. The lender puts a small loan, often $300 to $1,000, in a locked savings account. You make payments for 6 to 24 months. Then you get the money. | Interest and fees. A missed payment hurts your credit instead of helping it. |
| Authorized user | A family member or friend adds you to their credit card account. You are generally not responsible for paying the bill. | Ask the card company if it reports authorized users to the credit bureaus. The owner's late payments or high balance can hurt your credit. Use it as a first step, not your only step. |
| Lending circle | A group of people each pay into a shared fund every month. Each month, one member gets the whole amount. Some nonprofits run lending circles and report every payment to the credit bureaus. | A family tanda or susu builds credit only if someone reports the payments to at least one credit bureau. |
| Rent reporting | Your landlord, or a service you sign up for, reports your rent payments to at least one credit bureau. | Ask which bureaus get the data, if there is a fee, and if late payments are reported too. Not every credit score counts rent payments. |
One example of a lending circle program: the nonprofit Mission Asset Fund runs Lending Circles with partner groups. It says its loans have no interest, it reports payments to the three major credit bureaus, and people with an ITIN can use it to build credit.
Example
What it costs: a secured card or a credit-builder loan
Samuel works at a restaurant in Silver Spring and is paid partly in cash. He has $300 saved. He compares two offers from his credit union. These are example numbers. Always ask for the real costs in writing.
| Item | Secured card | Credit-builder loan |
|---|---|---|
| Money he puts in | $300 deposit | $636 in payments |
| Money he gets back | $300 | $600 |
| Yearly fee | $0 | $0 |
| Interest | $0 | $36 |
| Cost for the year | $0 | $36 |
$53 × 12 months = $636 paid; $636 − $600 returned = $36 cost
The secured card costs nothing if Samuel picks a card with no yearly fee and pays the full balance every month. He gets his deposit back when he closes the card and owes nothing, or when he moves to a regular card. The loan costs $36, but it works like a savings plan: at the end he has $600. Both build credit if they are reported to the bureaus. If Samuel did not have $300 for a deposit, the loan could be the easier way to start.
Newcomers and ITIN holders
An ITIN is a tax number from the IRS for people who cannot get a Social Security number. You can build a U.S. credit history with an ITIN. Some card companies and other lenders accept an ITIN on credit applications. Not all do, and the rules are different at each lender. Since June 2026, federal regulators have asked banks to look more closely at customers who use an ITIN. Some may ask for more documents or say no, so ask before you apply. Take this list of questions with you:
- Do you accept an ITIN for this card or loan?
- Do you report payments to Equifax, Experian and TransUnion?
- What are all the fees, each month and each year?
- For a secured card: what is the smallest deposit, and when can I move to a regular card?
- Which documents do I need, such as a passport, a consular ID or proof of address?
Use the same spelling of your name, the same birth date and your current address on every application. This helps the credit bureaus keep all your accounts in one file.
Credit from another country: Your credit history from another country does not appear on U.S. credit reports. A few U.S. lenders work with companies that can look at credit history from some other countries. Ask the lender if it can do this. If it cannot, start with one of the tools above.
Example
Month-by-month plan: Aisha's first score
Aisha moved to Takoma Park and works at a hotel. She has an ITIN and no U.S. credit history. Here is her plan. You can follow the same steps.
- Before you start: Get your reports from each bureau to see if you already have a file. Without a Social Security number, ask by mail. Save money for a deposit if you need one.
- Month 1: Open one account that reports to all three bureaus. Aisha opens a secured card with a $300 limit. She sets up automatic payment from her checking account for the full balance on each statement.
- Months 1 to 6: Use the card for one small, regular bill, like a $30 phone bill. Keep the balance under 30% of the limit. On a $300 card, that means less than $90. Pay the full balance by the due date every month.
- Month 6: Check your reports from all three bureaus. Make sure the new account is there and correct. A FICO score needs at least one account that has been open six months or more, and at least one account reported in the last six months. So around now, you may get your first score.
- Months 7 to 12: Keep using the card for small amounts and paying on time. Ask if you can move to a regular card and get your deposit back. Do not apply for many new accounts at once.
- After month 12: If you need it, add a second, different kind of credit, such as a credit-builder loan. Keep your oldest account open.
$300 limit × 30% = $90, so keep the balance under $90
Where can Aisha see her score? Many credit card companies give their customers a free credit score. HUD-approved housing counselors and nonprofit credit counselors can often give you a free credit report and score, too.
Watch out
Traps to avoid
- High fees. Some cards and credit builder products charge monthly fees, setup fees or yearly fees. Add up all the fees for one year and compare them with a secured card that has no yearly fee.
- Promises of a fast score. Building credit takes months. No one can give you a good score in a few days.
- A new credit identity. Some sellers offer a new number to use instead of your own Social Security number or ITIN. Using a number that is not yours to apply for credit is illegal. You could face fines or prison.
- Too much credit too fast. Opening several new accounts in a short time can lower your score and make lenders worry.
Scammers often target people who are new to the country. See scams that target newcomers.
Tip
Free help near you
In DC, the Department of Insurance, Securities and Banking offers financial education programs through its Office of Financial Empowerment and Education. In Maryland, the CASH Campaign of Maryland offers free financial coaching. Anywhere in the region, you can find a HUD-approved housing counselor who can review your credit for little or no cost. Need a bank or credit union account first? See how to open an account.
Key takeaways
- Having no credit history is not the same as having bad credit, but it can still cost you money.
- Start with one product that reports to all three credit bureaus. Use it for small amounts and pay on time every month.
- Some lenders accept an ITIN. Ask before you apply.
- A first FICO score usually takes about six months of reported history.
- Stay away from high fees, promises of a fast score, and anyone selling a new credit identity.
Check your understanding
Answer the questions, then select Check my answers. Get 4 of 5 right to complete this lesson. This is practice: there is no time limit, and we do not keep your answers.
Go further
Trusted websites where you can learn more. These links go to other websites that Dollar Scholars does not run.
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What are some ways to start or rebuild a good credit history? (another website)
Explains secured cards, credit-builder loans and store cards, and which products do not help build credit.
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Credit (another website)
Plain-language pages on how to build, check and improve your credit, written for adults learning English.
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Crédito (another website)
Plain-language Spanish pages on how to build, improve, and check your credit.
This lesson is general financial education, not legal, tax, or financial advice. Rules and amounts change, so check important numbers with an official source.