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How to Build Credit: An Expert Guide on Improving Your Credit Score

Holly D. Johnson - Contributor Updated: 25 January 2023 8 Min Read
Reviewed By Bestcovery - Editorial Team
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Building credit can be difficult at first, and that’s especially true when you are first starting out. After all, getting approved for a credit card or loan can be impossible when you haven’t had the chance to prove your creditworthiness.

Fortunately, there are numerous ways to build good credit, although some of the best strategies take time and a certain amount of effort. If you are interested in building credit and not sure how to start the process, read on to learn the basics of good credit and steps you can take to get there.

Key Takeaways for Building Good Credit:

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What is a credit score?

A credit score is a numerical representation of your credit health that is assigned to you based on the information in your credit reports. The most commonly used types of credit scores are the FICO credit score and the VantageScore.

The FICO score is the most popular type of credit score that is used by 90% of top lenders, so it’s easy to focus on building this type of score. When it comes to FICO credit scores, the number you’re assigned will fall between 300 and 850 with higher numbers representing better credit health. The following FICO score ranges also show approximately where you stand and how lenders might view your score if you apply for a loan:

FICO credit score ranges:


If you’re building credit for the very first time, there’s a good chance your credit score will start on the lower end of the scale. It’s even possible to not have a credit score at all if you’re new to credit and don’t have any credit history to speak of.

Either way, you should know that a good credit score is well within reach. You just have to figure out how to get started building credit, as well as the steps to take to keep your credit accounts in good standing.

Why your credit score matters

Your credit score may not seem like it matters at all, but it will quickly show its power if you ever try to take out a loan, get a new credit card, or apply for your own apartment. In any of these instances, a business will place a hard inquiry on your credit report to check your credit score and credit history. If they don’t like what they see, you may not be approved.

By and large, you need good credit if you ever want to:


While a good credit score can make all of these financial moves considerably easier to accomplish, poor credit can stand in the way of nearly every financial goal you have. With that in mind, it’s best to recognize you have substandard credit early on so you can take steps to fix it sooner rather than later.

1

Payment history (35%):

This factor is determined based on whether you pay your bills on time.

2

Amounts owed (30%):

This factor, also known as your credit utilization, represents how much debt you have in relation to your available credit.

3

Length of credit history (15%):

This factor represents the average length of all your credit accounts.

4

New credit (10%):

This factor is determined based on how many new credit accounts you have opened in the recent past.

5

Credit mix:

This factor is determined based on the types of credit you have, whether you have a personal loan, student loans, mortgage debt, revolving credit accounts, and other types of credit.

Once you look at the factors that make up your credit score, it’s fairly easy to see different paths you can take to improve it. The next section in our guide explains the exact steps you will take to improve your credit or even build credit from scratch.

Ways to build credit

While building credit can be challenging when you are starting from nothing, there are financial products geared to individuals in this exact position. There are also strategies that can help you boost credit no matter where you are in your credit journey.

Open a secured credit card

A secured card is a type of credit card geared to people with bad credit or no credit. This type of card requires a cash deposit as collateral, which usually starts at around $200. You will typically wind up with a credit limit that is equal to your security deposit, which means you won’t have a lot of purchasing power. However, secured credit cards report your payments and balances to the credit bureaus, which means you can use them to build credit over time.

While putting down collateral with a secured credit card may not sound ideal, keep in mind that you can get your security deposit back when you upgrade or close your account in good standing. Also note that many secured credit cards come with no annual fee.

Become an authorized user

If you have a family member or partner with good credit, becoming an authorized user on their credit card account can also help you build credit. Keep in mind that this only works when the credit card issuer reports authorized user activity to the credit bureaus, which is difficult to know ahead of time.

Either way, becoming an authorized user can mean getting a credit card with your name on it. However, there is risk involved for the primary borrower and for you. While their positive credit movements can help build your credit score, late payments and other credit mishaps have the potential to hurt your score. The primary cardholder is also solely responsible for all charges you make when you agree to pay them back or not.

Apply for a credit-builder loan

A credit-builder loan is a type of loan that asks you to make payments toward a bank account held on your behalf. You’ll pay a certain amount in interest and fees, but you’ll also get the majority of money you paid in back once your loan term ends.

More importantly, credit-builder loans report your payments to the credit bureaus, so they can help you build credit while you save money for the future.

Get a co-signer

If you need to borrow money and you have a family member with good credit you can count on, getting them to cosign on your loan can help you build credit. Just remember that your cosigner will be equally liable for repayment of your loan, so they are taking on quite a bit of risk on your behalf.

Pay bills on time

Since your payment history is the most important factor that makes up your FICO score at 35%, the way you pay your bills can have a disproportionate impact on your credit score. Where on-time payments have a credit-building effect, late payments and accounts in default can wreck your credit in a hurry.

If you’re worried you’ll accidentally pay your bills late, set a reminder on your phone or set some of your bills up on autopay.

Use credit-building apps

Credit-building apps like Experian Boost can help you get credit for regular bills like your phone bill, streaming services, and utility bills. Experian Boost is entirely free to use as well, so you have nothing to lose by giving it a try.

Just keep in mind that Experian Boost can only improve your Experian credit score, and specifically a score using the FICO 8 credit-scoring model. This means Experian Boost will have no impact on your credit scores with TransUnion or Equifax.

In the meantime, you can also see if you can get credit for rent payments using websites like RentBureau and RentTrack. Both of these companies can help you build credit with your rent when you wouldn’t otherwise be able to.

Other credit-building apps to check out include Kikoff and LevelCredit.

Look into student credit cards

Many credit card companies offer at least one card geared specifically toward students. Since students are often new to the world of credit and have little to no credit history, a student credit card can be a great option for those looking to build their credit. These cards usually have less strict credit score guidelines than traditional cards, but may have other requirements such as being enrolled in classes or having a cosigner.

Dispute credit report errors

Finally, make sure to check your credit reports for free using the website AnnualCreditReport.com. If you find errors on your credit reports, such as an incorrect balance, incorrect late payments, or a false credit limit, there are formal steps you can take to dispute the erroneous reporting.

How to build credit without a credit card

Building credit can be more difficult when you don’t have a credit card, but plenty of the steps above can still help you get started. For example, you can always apply for a credit-builder loan from a company like Self. With a Large Builder Loan from this company, you could pay $48 per month for 12 months and get $539 back at the end of the year. During that time, your payments would be reported to the credit bureaus, and you would only fork over $46 in interest and fees.

Apps like Experian Boost can also help you build credit using regular bills, and becoming a co-signer on another person’s credit card can also help.

Most importantly, you need to be responsible and careful with any credit you are granted. This means paying bills on time, keeping your debt-to-income ratio at a reasonable level, and avoiding situations where you get in over your head.

How to establish credit with no credit history

If you don’t have any credit history at all, many of the same strategies apply. However, a secured credit card could be the best financial product for your needs.

This type of credit card can approve anyone — even people who have no credit history at all. This is based on the fact you secure your own credit line with a cash deposit. If you were to default and stop paying your credit card bill, your own security deposit will be used to pay it off.

In the meantime, a secured card will report all your credit movements to Experian, Equifax, and TransUnion. This means that on-time payments to your secured card issuer can help boost your credit score in a short amount of time.

On the flipside, it’s worth noting that late payments on a secured card can make your credit score worse than it is. Finally, the low available credit you get with a secured credit card can make it difficult to keep your credit utilization on the low end. For that reason, we suggest only using a secured card for purchases you can afford to pay off each month.

Credit mistakes to avoid

To avoid some of the biggest credit mishaps out there, you first need to know where you stand. With that in mind, we suggest checking your score using any number of tools, including Capital One CreditWise, Credit Karma, or CreditSesame. Each of these tools will let you see at least one version of your score for free, and they can also help you identify problems within your credit reports.

Once you know how you’re doing in terms of good credit, you should follow these rules:


Whatever you do, make sure to take your credit seriously, and focus on borrowing responsibly for the long haul. While good credit can make your life easier, a bad credit score almost always does the opposite.

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Holly D. Johnson
Holly D. Johnson Contributor

Holly D. Johnson is an award-winning personal finance writer who covers topics like insurance, investing, credit and family finance. As a leading voice in the travel and loyalty space, Johnson has traveled with her family to more than 50 countries over the last decade. 

The author has also written extensively on the power of household budgeting, and she even co-authored a book on the topic. Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love was originally published in 2017, and it teaches families how to use zero-sum budgeting to reach their financial goals. She is also the co-owner and founder of the family finance and travel website, ClubThrifty.com.

Johnson’s 10+ years of writing have focused on helping families make important financial decisions at each stage of their lives. The author also applies the financial principles she teaches to her own life, and she is currently on track to retire in her late 40’s with her partner. She currently lives in Central Indiana with her husband and children, and she is a regular contributor for Bankrate, CNN, Forbes, U.S. News and World Report Travel and many other notable publications.