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How to Build Credit: Expert Steps to Build & Improve Your Credit Score

Key Takeaways

  • You can build credit in many ways, but getting a credit card is one of the easiest and quickest ways to build credit.
  • Building good credit relies on showing good purchasing habits and paying on time, and in full.
  • Your credit score takes into account your payment history, how much you owe, how long you’ve had credit, new requests for lines of credit, and different types of credit accounts in your name.
  • Building good credit is easy as long as you use credit wisely, pay off what you owe, and don’t rack up debt on your credit accounts.

Learning how to build 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.

Loans & credit cards both help you build credit. If it’s your first time, you can start building credit with a secured credit card, or by becoming an authorized user on a family member’s card. Requesting a credit builder loan, secured loan, or becoming a co-signer on a family member’s loan can also help you start building credit safely.

Although some of the best strategies take time and a certain amount of effort, anyone can learn the basics of good credit and the steps you can take to get there. Read on as we show you our top tips for how to build credit.

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Understanding credit scores & their impact

In America, credit scores determine how good or bad your credit is. Therefore, building a good credit score can be considered the key to opening the door to a successful financial future.

However, the key to building credit starts with clearly understanding how credit works and knowing what you should be working toward.

So, before we jump into our tips for building good credit, let’s take a look at what a credit score is, why it matters, and how your credit score is calculated.

What is a credit score?

A credit score is a type of number that is assigned to you by a credit union. It represents your overall credit health on a numerical scale. Your credit score can indicate how trustworthy you are to lenders which makes it a valuable asset to have and protect.

The FICO credit score and the VantageScore are the most commonly used types of credit scores in America.

However, the FICO score is the most popular of the two and is used by 90% of top lenders in America. For this reason, many people focus on tracking and building this score over the VantageScore.

When it comes to FICO credit scores, the number you are 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 at the low end of this scale. It’s even possible to not have a credit score at all if you’re new to credit, new to the U.S., or if you simply don’t have any credit history to speak of.

Why does building a good credit score matter?

Building a good credit score matters because it shows lenders that you are a trustworthy (or untrustworthy) borrower, depending on your score.

You will use your credit score if you ever need to take out a loan, get a new credit card, or apply for your own apartment. In each of these examples, a business conducts a hard inquiry on your credit report to verify your credit score and credit history. If they don’t like what they see, you may not be approved.

Likewise, if you don’t have a credit score you may find many tasks that require credit checks nearly impossible later on in life.

Here are some examples of common scenarios that require a good credit score:

As you can see, there are many important reasons to start building credit as soon as possible. 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.

How credit scores work

Your three-digit credit score is assigned by each of the credit bureaus — Experian, Equifax, and TransUnion — using information reported to them.

This information can include the balances you owe, your payment history, accounts you have in default, and more. It can help you build credit or make it worse depending on how good you are at managing your finances.

When it comes to FICO credit scores, five major factors are used to determine where your score falls:

Credit score breakdown chart Credit score breakdown chart

Once you look at the factors that make up your credit score, it’s fairly easy to see how to build credit and different paths you can take to improve it.

With that in mind, let’s take a look at our tips for building a credit score from scratch.

Ways to build credit from scratch

Starting to build credit from zero is almost a right of passage in America. Everyone has to start somewhere, and most people start with no credit history at all.

That said, there are ways to build credit that can capitalize on other people’s existing credit history to help you get a boost when starting to build your credit. There are also tools and strategies designed specifically for people who are starting their credit journey.

Here are some ways to build credit quickly from scratch:

  1. Get a secured credit card
  2. Become an authorized user on someone else’s card
  3. Get a credit-builder loan
  4. Find a co-signer
  5. Pay on time, every time
  6. Use credit-building apps
  7. Start with a student credit card
  8. Dispute any errors in your report

Following any of these tips should help you start to build credit from scratch, but they can also improve your existing credit score.

Let’s break each point down for a closer look.


Open a secured credit card

A secured card is a type of credit card for 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.

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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 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.

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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 the money you paid 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.

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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 the repayment of your loan, so they are taking on quite a bit of risk on your behalf.

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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.

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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. Lastly, check for discounts on MyFico and other credit-building apps like Kikoff and LevelCredit.

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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.

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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.

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How to build credit: the best practices

As we have mentioned, there are many ways to build credit quickly, and some are easier than others. That said, here is our list of important habits and goals to master for building good credit.

  1. Pay your bills on time, every time:
    Being late on your payments will hurt your credit score and will generate high interest that can leave you in more debt. High debt on your card that rolls from month to month will also damage your credit score. For this reason, the best tip is to pay your bills on time and in full, each month.
  2. Keep your credit card balances low:
    Similar to how spending more than 30% of your credit line acts as a bad signal to lenders, high balances can indicate you don’t have enough money to pay your bills. This is a sign to lenders that you may not be a trustworthy borrower. As a result, your credit score will drop.
  3. Diversify your credit profile:
    Consider applying for a mix of credit cards, loans, and mortgages. If you make on-time payments, applying for different types of credit can help you build credit faster and improve your overall credit score. That’s because a diverse mix of credit types shows banks that you are successful at managing your debts and paying off multiple credit lines at a time.
  4. Limit new credit applications:
    Although we recommend applying for different types of credit, you should be careful when and how often you do it. Each time you apply for a new line of credit, it shows up as a hard inquiry on your credit report. Hard inquiries will lower your score in the short run, but on the flip side, gaining a new type of credit will improve your score in the long run.
  5. Check your credit report regularly:
    Even credit bureaus make mistakes. For this reason, it’s important to make sure your reports are accurate and dispute any errors that you see to get them rectified as soon as possible. By reading your credit report you can also learn from mistakes you make and avoid them in the future.

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 flip side, 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 Finance Expert

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.

* Opinions expressed here are those of the LA Times Compare Cards Team and have not been reviewed or approved by any advertiser or entities included within this content. See our editorial policy for more details.

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