topic Re: Building credit score from nothing (reached 750 in 3 years) in General Credit Topics

Building credit score from nothing (reached 750 in 3 years)

credit_economist — Thu, 29 Feb 2024 01:48:23 GMT

Hi MyFICO Forum newcomers,

For all of you looking to start building your credit score from nothing, here is my own story, in case it helps you:

0. Started with absolutely nothing

I started building my credit score in 2017 from absolutely nothing. I had no previous credit history, no previous debt, no family that could add me to their own credit cards, not even a bank account, nothing.

1. Opened a bank account (month 0)

I opened a bank account with one of the major banks, put some money on it, and let is mature for a few months. I also received a few paychecks to this bank account.

2. Applied for a 1st, "secured" credit card (+ 3 months)

After a few months of having a relationship with my bank, I tried to apply for a regular credit card (CC) with them. I was denied due to no existing credit history. The bank gave me an alternative - apply for a "secured" CC. This is a CC that you "secure" by putting down your own money as a security deposit, so that if you then later don't pay your CC debt, the bank can theoretically pay it from your deposit. The amount and duration of your security deposit are equivalent to the credit limit (CL) and expiration date of your "secured" CC, e.g. I paid a security deposit of $1,500 for 5 years, and in exchange I was approved for a "secured" TD Cash Rewards Visa CC with a $1,500 CL, and an expiration date in 5 years. The good news is: while you cannot take out your security deposit during these 5 years, your security deposit is earning interest while it is with the bank, so your money is working for you in two ways - giving you your 1st CC, and earning you interest!

3. Started having a credit score & tracking it (+6 months)

The moment I got approved for my 1st CC and started using it for purchases, even if it was "secured", my credit history started going. However, it usually takes 3-6 months of credit history for the credit score (CS) to actually start forming by all 3 of the major credit bureaus - Experian (EX), Equifax (EQ), and Transunion (TU). All 3 bureaus have slightly different scores, but in my experience, EX tends to be the strictest & usually lowest. Also, there are multiple versions of CS by all 3 bureaus - FICO 8 score, FICO 9 score, Vantage scores, etc., out of which FICO 8 seems to usually be the most important CS to track. So after 6 months of using my 1st "secured" CC, I was finally able to see my CS for the first time, which was very exciting! I got the FICO 8 score by EX, EQ, and TU all with a free trial from CreditScore. I think my CS started around 683, which for only 6 months of credit history sounded pretty good to me!

4. Applied for non-secured regular credit cards (+6 months)

After using my 1st CC for 1 year, tracking my CS for 6 months, and seeing the CS reach 700, I decided to try applying for new, non-secured, regular CCs. I already had a Visa so as my 2nd CC, I applied for Amex, because I learned from MyFICO forum that Amex tends to be generous both with CC approval and with the CL that they give new users. I applied specifically for Amex Cash Magnet because I like CCs that are cash-back and have 0 annual fees (AFs), and I was approved, with a CL of $2,000! As my 3rd CC, I almost immediately also applied for Discover It Cash Back, and was approved, with a CL of $1,700! This is where things started getting really exciting, because with my 1st "secured" CC I didn't get any introduction benefits (you usually don't), but with these new regular CCs I got introductory bonus of $200 when I spent $1,500 with Amex in the first 3 months, and I got my cash back doubled in the first year of use with Discover. Also, having more CCs meant I could now divide & conquer my expenses by the CC that would give me the biggest cash-back among these 3. At this point, my CS was around 720, and it decreased down to 690-700 with my new CC applications (apps), but then it increased back up to 720 a 1-2 months later, and kept slowly rising to 730-740 as I used my new CCs.

5. "Graduated" my secured credit card (+6 months)

After using all 3 of my CCs for another 6 months, and basically having had my secured CC for 1.5 years at that point, I applied with the bank to have it "graduate" from a secured to a non-secured, regular CC. I was approved! This meant that instead of having to keep my security deposit of $1,500 with the bank for the full 5 years, I only had to keep it with the bank for 1.5 years, and it was now available for me to use as I please, with 1.5 years worth of interest. At this point, my CS was around a healthy 740-750, with ocasional jumps to 760.

6. Applied all cards for a credit limit increase (+6 months)

After using all 3 of my (now regular) CCs for another 6 months, I followed another great advice on MyFICO forum and applied for a credit limit increase (CLI) on all 3 CCs. I learned on the forum that Amex usually gives the biggest CLI, as big as 3x your current CL, so I applied with Amex first, and was approved for a CLI from $2,000 to $6,000! Then I applied for a CLI with Discover, and was approved for a CLI from $1,700 to $3,500. Finally, I applied for a CLI with TD Bank, and was aproved for a CLI from $1,500 to $2,000 (admittedly a disappointing CLI from TD compared to the others, but I've come to expect over time that they are more conservative). At this point, my CS was around 750-760, it dipped for 1-2 months with the new CLIs but then came back up and increased to 760-770.

7. Continued applying for new credit cards or credit limit increases periodically

In conclusion, it took me 2.5-3 years to build my CS from nothing to a "very good" 750-770. Since then, I continued applying for new CCs or CLIs periodically - CCs not more than once per year, CLIs have tried every 6 months. Amex managed to get a 3x CLI again from 6K to 18K but after that it was less than 3x, and I settled at 28K after another 2 years. Discover managed to get to $6K after 2 more years. TD managed to get to $6K as well but that took longer, around 4 years. Having all these CCs also made me eligible for new, more restrictve CCs, so I got the Chase Freedom Unlimitd Visa, originally at CL of $2,000, after 2 years with CLI at $6,700. So this milestone was reached around 5-6 years after I started with nothing. And my CS managed to reach 780.

I am back on the forum to learn more, and reach my next CS goals. But if you are starting from nothing, I hope this story helps you in your own CS journey from nothing - to many great things! :-)

Re: Building credit score from nothing (reached 750 in 3 years)

Horseshoez — Thu, 29 Feb 2024 02:04:22 GMT

@credit_economist, congratulations on your rebuild!

Interesstingly enough, while you and I started rebuilding for different reasons, we both started with a secured TDCash card. In my case I needed something I could use for travel, meaning I could run up some pretty hefty charges in a month, so I plunked down $5,000 into a savings account and got that as a limit on my card. I put quite a bit of spend through the card starting from the day I got it (almost two weeks after I was approved), and then almost six months to the day after the card arrived in the mail, it graduated.

I think we are of a similar mind set in that we ascribe much of our rebuilding success to that first secured TDCash card.

Re: Building credit score from nothing (reached 750 in 3 years)

CorpCrMgr1 — Thu, 29 Feb 2024 02:07:27 GMT

Great story. Congratulations on your credit journey!

Re: Building credit score from nothing (reached 750 in 3 years)

credit_economist — Thu, 29 Feb 2024 18:58:53 GMT

Thank you for adding your experience @Horseshoez !

Just to clarify 2 points for any newcomers reading this story:

Build from nothing vs. rebuild: While potentially similar, my credit story is NOT a credit rebuild, it is a credit build from nothing. I want to make this distinction clear because this story will be most useful to those who are starting from nothing, no previous credit history at all. The story may of course also be useful to those going into rebuilds, meaning with at least some previous credit history be it good or bad, but there are already many more rebuild stories on the forum, so I specifically wanted to share this story for those bulding from absolutely nothing.
Any major bank should work for your "secured" CC: While the two of us both got our "secured" CC from TD Bank, any major bank should work similarly well for you to get your 1st "secured" CC. In my case, TD Bank just happened to be convinently located for me, so I went with them. If I was closer to a Chase Bank I could have just as easily have started my credit journey with them instead.

Re: Building credit score from nothing (reached 750 in 3 years)

Horseshoez — Thu, 29 Feb 2024 20:06:51 GMT

@credit_economist wrote:
Thank you for adding your experience @Horseshoez !

Just to clarify 2 points for any newcomers reading this story:
Build from nothing vs. rebuild: While potentially similar, my credit story is NOT a credit rebuild, it is a credit build from nothing. I want to make this distinction clear because this story will be most useful to those who are starting from nothing, no previous credit history at all. The story may of course also be useful to those going into rebuilds, meaning with at least some previous credit history be it good or bad, but there are already many more rebuild stories on the forum, so I specifically wanted to share this story for those bulding from absolutely nothing.
Any major bank should work for your "secured" CC: While the two of us both got our "secured" CC from TD Bank, any major bank should work similarly well for you to get your 1st "secured" CC. In my case, TD Bank just happened to be convinently located for me, so I went with them. If I was closer to a Chase Bank I could have just as easily have started my credit journey with them instead.

Understood. I did a lot of research before I opened up my secured TDCash card, and one thing is for certain, not all secured cards are created equal. Some have low maximum limits, like $1,000, some NEVER graduate, ever, some take three, or four, or five years to graduate. Some pay rewards, many dont; some pay interest (albeit not much) on the security deposit, most don't.

While it is true any secured card will get you started, but without any tangible evidence, my gut tells me having a $5,000 limit on my secured card opened the door to other unsecured lines with large(ish) limits much sooner than I would otherwise have qualified for.

Re: Building credit score from nothing (reached 750 in 3 years)

credit_economist — Thu, 29 Feb 2024 21:14:41 GMT

Thank you @Horseshoez, very interesting insights on "secured" CCs!

Do you remember from your research which "secured" CCs do pay rewards? I think people starting out may love to hear about these!

Did your TD Cash Rewards pay rewards while it was secured? I can no longer remember if mine did or not. I just remember it paid a very good interest for me, something close to 5% per year!

Re: Building credit score from nothing (reached 750 in 3 years)

Horseshoez — Thu, 29 Feb 2024 22:22:40 GMT

@credit_economist wrote:
Thank you @Horseshoez, very interesting insights on "secured" CCs!

Do you remember from your research which "secured" CCs do pay rewards? I think people starting out may love to hear about these!

Did your TD Cash Rewards pay rewards while it was secured? I can no longer remember if mine did or not. I just remember it paid a very good interest for me, something close to 5% per year!

Wow, 5%, no, I didn't get anywhere close to that; I just checked:

Interest on $5,000 between 24-Jun-2020 and 07-Jan-2021: $1.27 (per my statements, they were paying me at the rate of 0.05%)
Rewards between 06-Jul-2020 and 04-Jan-2021: $114.74
Annual Fee: Assessed on 03-Jul-2020 for $29.00 with a credit of $14.50 hitting my account on 05-Jan-2021

Regarding other secured cards which were offering rewards back in 2020, the only one I remember was Discover, and for whatever reason, they denied me a secured card, even though I'd never been a Discover customer before. That said, their secured card had a maximum credit limit of only $2,500, so if they had approved me and if I had needed to travel, I would have been hard pressed to make it work for an entire month.

Re: Building credit score from nothing (reached 750 in 3 years)

gorgon — Fri, 01 Mar 2024 16:21:14 GMT

Great progress. Thanks for sharing.