Credit Repair

I Haven’t Used Credit for Years. Can I Build My Score Again?

It’s been several years since you used credit, but you’re ready to start rebuilding your score. The process may require patience, but the good news is, it shouldn’t be too difficult.

Due to inactivity, your credit score might be low, or if you haven’t used credit in more than 24 months, there’s a chance you don’t have a score at all, according to Experian. Use this guide to find out what you’ll need to do to get your score back to a healthy level.

How can you start building credit again?

Rebuilding your credit after years of inactivity is like recovering from an injury or starting a new physical activity — start small and build up slowly, said Justin Pritchard, a certified financial planner in Montrose, Colo., and founder of Approach Financial Inc.

Here are a few steps you can take to rebuild a healthy credit score.

Check your credit report

If you haven’t been using credit for years, you probably haven’t been monitoring your credit report. Pritchard advised taking this step to make sure your credit reports do not contain any errors or signs of fraud.

“Any mistakes can prevent you from getting approved for new loans, making it hard to rebuild your credit,” Pritchard said.

Christine Centeno, a certified financial planner at Simplicity Wealth Management in Glen Allen, Va., recommended requesting your credit reports from all three credit bureaus — Equifax, Experian and TransUnion — at The Fair Credit Reporting Act requires all three agencies to provide you with a free credit report once every 12 months, upon request.

“The reports will indicate where your specific risk factors lie,” she said.

Take out a cash-secured loan or open a secured credit card

“You can deposit funds with a bank or credit union and get a credit card or installment loan for the amount you have on deposit,” Pritchard said. ”The lender’s risk is very low because they already have your money, but they typically report those loans to credit bureaus.”

When taking this step, the most important thing you can do is always pay on time.

“Whether you have large loans or small loans, late payments hurt your credit,” Pritchard said.

Open a new credit card

“Apply for a credit card, and expect — or even ask for — a low credit limit,” Pritchard said. “With less risk, lenders may be more willing to approve you.”

Use the card normally, even if you’re only granted a limit of a few hundred dollars, and pay the balance off each month, he said.

“If you have a low credit limit, be sure to keep your [credit utilization ratio] below 30% or so,” Pritchard said. “Even if you pay off the card every month, the card issuer might report your balance to credit bureaus mid-month, making it look like you’re maxed out.”

If you don’t qualify for a traditional credit card, apply for a secured card. You’ll need to provide a security deposit to fund your credit line, but beyond that, it works like a standard credit card.

Try to reinstate your credit card account

If your credit card was canceled due to inactivity, the issuer might agree to reinstate your account with the date it was originally opened. You could be subject to a credit check, but you’ll benefit in terms of the length of your credit history.

Become an authorized user on another person’s credit card

Ask a parent, spouse or other family member to add you to their credit card account as an authorized user. You’ll receive your own card and build a credit history.

“This will show up as a line of credit on your report,” Centeno said. “It will be noted that you are an authorized user and not the primary account owner.”

Importantly, the primary account holder is responsible for paying the bill each month. Only take this route if you’re certain the other person can be trusted. If they don’t make on-time payments, your credit score will likely take a hit.

What happens to your score when you don’t use credit for a long time?

If you haven’t used it in many years, this is what might be going on with your credit.

Your credit utilization ratio could decline

“Generally, credit bureaus are looking for activity within the last six months,”  Centeno said. “The longer the period [of] inactivity, the greater the impact on your credit.”

Coming back from credit inactivity is different than coming back from bad credit, Centeno said, because the former impacts your utilization rate but not your credit history.

“For example, [for] someone coming back from living abroad, it’s all about usage of credit lines, but not necessarily repairing a poor credit history — late payments, delinquent accounts,” she said. “Someone with bad credit would be focusing on repairing both their history and their utilization rate.”

She said it typically takes longer to repair a less-than-ideal credit history than credit inactivity alone.

Data will be removed from your credit report

In most cases, negative information — including late payments and bankruptcies — stays on your credit report for roughly seven to 10 years. Positive information includes active accounts “paid as agreed,” which stay on your report as long as the accounts are open and the lender continues reporting them. Closed accounts marked paid as agreed remain on your credit report for up to 10 years from the date the lender reported it closed.

You might become credit invisible

One in 10 adults — 26 million Americans — are “credit invisible,” according to the Consumer Financial Protection Bureau. This happens when you don’t have any credit history with a nationwide consumer reporting agency. Having a credit score of zero is impossible, but being credit invisible means having no score at all, which could cause your credit application to be denied.

The bottom line

Rebuilding your credit after years of inactivity will take time, but you can do it. If you follow the steps above, you’ll slowly but surely begin to see your score rise.

Your hard work to rebuild your credit will be well worth the effort if you need to finance a major purchase, such as a home or vehicle. Your credit score impacts both your access to financing and the rates you’re offered.


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