Updated: May 03, 2023

What Millennials Need to Do to Fix a FICO Score of Zero

Getting approved for a credit card or loan is tough when your FICO score is zero, but there are easy ways to establish your credit history, quickly.
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Credit scores are a measuring stick that lenders use to gauge your financial fitness but it's harder for them to do when you're starting from zero. For millennials who tend to avoid using credit, that can be a major stumbling block if you're trying to buy a car or finance a home. Following these simple steps can help you establish your score and build a positive credit history in your 20s and beyond.

1. Check your FICO score

There are a number of credit scoring models that lenders use to determine your creditworthiness but the granddaddy of them all is the FICO score. This score, developed by the Fair Isaac Corporation, is based on the following five factors:

  • Payment history
  • Total amount of debt you owe
  • How old your accounts are
  • Types of credit you're using
  • Applications for new credit

FICO scores range from 300 to 850, with 850 being the highest score you can achieve. Generally, a score in the 700 to 750 range is enough to get approved for certain loans or lines of credit but some lenders may be willing to work with you if your credit score is closer to 650.

You can get your score directly from FICO but you'll have to pay to do it. If you don't have the extra cash to spare, there are a couple of ways to get your score without paying a dime. The first is to sign up with a credit monitoring service like Credit Karma, which offers free ongoing access to your score and credit report. A second option is to check your scores for free through the Mint budgeting app. Mint allows you to link up your bank accounts to track spending but you can also check your score and create credit alerts at no cost.
Tip: Payment history accounts for 35 percent of your FICO score so paying all of your bills on time is the most important thing you can do to build credit.
If you don't have a credit score

The information that's listed in your credit report is what's used to calculate your score, so if all you see is a big fat goose egg, that means you have no credit history. The only way to get a credit history is to have at least one account in your name that's reported to the credit bureaus. That means you'll need to rack up some debt so you can pay it off but what's the best way to do it?

2. Start with a secured credit card

Getting credit when you have no credit is a catch-22 of sorts but there are ways to get around it. A secured credit card, for example, can be a good stepping stone if you choose the right one.

Secured credit cards require you to make a cash deposit with the card issuer in order to open an account. The deposit usually serves as your credit limit, which can be anywhere from $300 to $500 although it may be higher or lower depending on the card. When you make purchases, your available credit is reduced until you make a payment.

When you're comparing secured cards, pay close attention to the interest rate and fees. These cards tend to be much more expensive, compared to traditional cards and if you're not paying the balance in full each month, the interest can really drain your wallet. Many of them also come with an annual fee so that's something else to watch out for.

3. Upgrade to a regular credit card

If you're using your secured card responsibly by keeping the balance low and paying the bill off each month, you should be able to either convert the card to a regular account or get approved for a traditional card. The benefits of upgrading usually include a better interest rate and a higher credit limit. If you go with a rewards cards, there's the added plus of being able to earn points, miles or cash back on what you spend.

Rewards cards aren't created equally so if you're shopping around for one, keep in mind that the better the perks the better your score will need to be to get approved. Just like with a secured card, you'll want to take note of the APR and the fees for each one you're looking at. Take a look at MyBankTracker's credit card comparison page to see which banks are offering the best deals now.
Tip: Many major card issuers, including Discover and Capital One, offer card members free access to scores. When you're comparing cards, look for one that includes this feature.

4. Ask your landlord to report your rent payments

If you're just starting out on your own and renting your first place, you've got an easy way to build credit right at home. Once upon a time, rent payments didn't factor into your credit score calculation but that's no longer the case. Experian and TransUnion, two of the three major credit reporting bureaus, now track rent payment history for consumers.

This service is completely voluntary so you'll have to ask your landlord to sign up for an account with each bureau's rent reporting system. You can also sign up for an account of your own and set up recurring electronic rent payments so you don't have to worry about being late or writing a check each month. That's a pretty painless way to give your score a boost.

5. Keep an eye on your score, going forward

Establishing your credit score is the easy part -- the real challenge is keeping it in good shape. If you've got free access to your score, either through a credit card or credit monitoring service, you should be checking it at least once every three months to see if there have been any major changes.

If you notice any big fluctuations (either up or down), you'll want to get free copies of your credit report from AnnualCreditReport.com to see what new information is being reported. Make sure all of your balances are correct, look out for any suspicious activity and don't hesitate to dispute errors or inaccuracies if you find them.

Have you managed to build a solid credit score after starting from scratch in your 20's? Tell us how you did it in the comments.

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