Best Accounts for Establishing Credit History from Scratch

Starting your credit journey can feel like being stuck in a frustrating loop: you need credit to build credit history, but you need credit history to get credit.

Maybe you're new to Canada and your excellent credit from back home doesn't count here. Maybe you're a young adult who's never had a credit card. Or maybe you've always used cash and debit, and now you're realizing that "no credit history" is almost as challenging as "bad credit history."

Why traditional credit is so hard to get without history

Here's the frustrating reality: most banks and credit card companies want to see that you've successfully managed credit before they'll give you more credit.

They look at your credit report expecting to see:

• A track record of on-time payments

• Different types of credit accounts

• Several years of credit history

• A credit score in a certain range

When your file is empty or thin, they don't have that information. And without it, they're hesitant to approve you—even if you have a good income and have never missed a bill payment in your life.

This is why specialized accounts for building credit exist. They're designed with the understanding that responsible people need a starting point.

KOHO Essential Account

The KOHO Essential account is a no-fee spending account that gives you a foundation for daily money management.

You can access KOHO Essential with no monthly fees by either:

• Setting up direct deposit to your account, OR

• Adding $1,000 or more to your account each month

With a KOHO Essential account, you get access to KOHO Credit Building. This means you can start establishing credit history while using your account for everyday expenses.

KOHO Everything Account

If you want to supercharge both your spending rewards and your credit building, the KOHO Everything account takes things up a notch.

Cost: $14.75/month on an annual plan

With Everything, you get 50% off Credit Building—paying just $5/month instead of $10/month.

Additional benefits:

• Earn 3.50% interest on your balance

• Earn 2% cash back on groceries, transit, and dining

KOHO Credit Building

KOHO Credit Building is the feature that actually establishes your credit history.

Here's what makes it work:

You get a dedicated tradeline — This is an account that appears on your credit report, showing lenders you have active credit.

You make small monthly payments ($5-$10 depending on your plan) that get reported to Equifax.

KOHO members using Credit Building have seen their credit scores increase by an average of 31+ points in just 4 months¹.

You get access to KOHO's Free Financial Coaching to guide you through the process.

What makes a good account for building credit from scratch

When you're comparing your options, here's what to look for:

✓ Confirmed Credit Bureau Reporting

The account must report your payment activity to at least one major credit bureau (Equifax or TransUnion) every single month.

✓ No Credit Check or Guaranteed Approval

Since you're starting from scratch, you need an account that doesn't require existing credit to qualify.

• "No credit check required"

• "Guaranteed approval"

• "Designed for people with no credit history"

✓ Affordable Costs

You'll be using this account for months or even years. Make sure the fees are sustainable:

• Monthly fees you can comfortably afford

• Reasonable interest rates (or no interest at all)

• No hidden charges that add up

Building credit shouldn't put you in a worse financial position.

✓ Low Barrier to Entry

Some accounts require large deposits or minimum balances.

• Low or no deposit requirements

• No minimum income requirements

• Easy application process

✓ Grows With You

The best accounts offer a path forward:

• Can you increase your credit limit over time?

• Is there an upgrade path to better products?

• Do you build a relationship with the provider?

You don't want to start over from scratch every time you level up.

✓ Educational Support

Building credit for the first time can be confusing. Accounts that offer:

• Clear explanations of how everything works

• Credit score tracking

• Educational resources or coaching

• Tips for improving your score

Common Mistakes to Avoid

Mistake #1: Choosing an Account That Doesn't Report

Not every financial product reports to credit bureaus. Always confirm that your account will actually report your activity monthly. If it doesn't, you're wasting your time for credit-building purposes.

Mistake #2: Missing Payments Because You Forgot

Life gets busy, and it's easy to forget payment dates. This is why automation is so important. One forgotten payment can undo months of progress.

Mistake #3: Maxing Out Your Credit Limit

Just because you have a $500 credit limit doesn't mean you should use all $500. High utilization hurts your score. Aim to use 30% or less of your available credit.

Mistake #4: Closing Your First Account Too Soon

Once you've built some credit and qualify for better products, you might be tempted to close your first account.

Keeping it open helps your credit age and overall utilization ratio.

Mistake #5: Not Checking Your Credit Report

Errors happen. Payments might not get reported correctly. Fraudulent accounts could appear. Check your report at least once a year to catch issues early.

Mistake #6: Getting Discouraged Too Quickly

If your score isn't moving after a month or two, that's normal. Credit building takes time. Don't give up just because you're not seeing immediate results.

Mistake #7: Taking On More Credit Than You Can Handle

Once you start building credit, you'll get offers for more credit cards and loans. Be strategic about what you accept. More credit isn't always better, especially if it tempts you to overspend.

Your credit building journey starts today

Building credit from scratch isn't as intimidating as it seems. Yes, it requires patience and consistency. But thousands of people do it successfully every year—and you can too.

The key is choosing an account that fits your situation and committing to the process.

• KOHO Essential or Everything with Credit Building

• A secured credit card if you have deposit money available

• A credit builder loan if you want to save while building credit

• Or another option that makes sense for your circumstances

What matters most isn't which specific account you choose—it's that you choose one, start making on-time payments, and stick with it.

¹Based on users with a starting score of 500 or less and who signed up for credit building in October 2024. Credit Building is not a credit repair tool and does not guarantee an improvement in credit score. Credit scores are based on complex models involving a variety of factors. Consistent on-time payments help improve scores and missed or late payments may cause credit scores to decrease. Outcomes may vary among users.