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How To Build Credit in [2024]: 7 Simple Strategies

Reaching your financial goals becomes faster and easier when you know how to build credit the right way.

How to Build Credit
Ben Walker, CEPF, CFEI®
Samantha Hawrylack
By Ben Walker, CEPF, CFEI®
and Samantha Hawrylack
Becca Borawski Jenkins
Edited by Becca Borawski Jenkins
Updated Dec. 17, 2024
Fact checked

According to data from Experian and consulting firm Oliver Wyman, 19% of the U.S. adult population, or around 49 million people, either lacks enough credit history to have a credit score or is otherwise unscorable. On top of that, 57 million have below-average credit.

Without a sufficient credit score, borrowing money can be more than a little tricky, and building credit without borrowing money is no walk in the park either. Building credit for the first time or improving it after damage takes time and consistency. Fortunately, there are many ways to get started. Learn how to build credit, whether doing it for the first time or looking to improve your score, here.

Steps to build credit

1. Apply for a secured credit card

Credit cards provide one of the simplest ways to build credit. There are two main types of credit cards: secured and unsecured. Secured cards require you to make a deposit when you sign up, which typically becomes your credit limit. This deposit is used as collateral, and the issuer will keep it if you can’t repay your balance. Unsecured cards don’t require collateral and have much stricter credit requirements (though you can get some unsecured credit cards with bad credit).

Many credit cards are unsecured, and the best of these typically require an established credit score — often even good or excellent credit, defined as a FICO score of at least 670 — to qualify. This is why I recommend secured credit cards for borrowers with poor, limited, or no credit. However, they often have annual fees and lower borrowing limits than unsecured cards.

Security deposits
Deposit amounts for secured credit cards typically range from around $200 to $1,000 or more, and you generally get to decide how much you deposit. As long as you repay your balance, you’ll get your deposit back if you decide to close the card.

If you pay off your credit card debt in full and on time each month, and you use it regularly, your credit will likely improve. After some time, you can probably consider unsecured cards.

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2. Practice good money habits

To build and improve your credit consistently, adopt these habits:

  • Keep your credit utilization low: Your credit utilization is how much credit you use as a percentage of the total credit you have available to use. For example, if you have a credit line of $1,000 and a current credit card balance of $300, you have a credit utilization ratio of 30%. You typically want to keep your credit utilization below 30%.
  • Don’t cancel credit cards: It may be tempting to cancel a credit card once you pay it off or when you feel you no longer need it. But if the card has no annual fee, it could be worth keeping. The length of your credit accounts makes up about 15% of your credit score, and it’s better to have credit accounts with long histories instead of short ones.
  • Only borrow what you need: Whether you’re taking out an installment loan or putting money on a credit card, only borrow what you need and never a penny more. You should build debt repayments into your budget and staying on top of your balances is a lot easier to do when you keep your borrowing to a minimum (even if you qualify for more).
  • Don’t open too much credit at once: Credit card issuers and financial institutions typically initiate a hard credit check or pull when you apply for new credit, which gives them a detailed snapshot of your debt and borrowing. Each hard pull tends to cause your credit score to dip by a few points. If you have too many recent hard inquiries in a short period, this can be a red flag that you’re in a tough spot financially and desperate to borrow.
  • Pay all your bills on time: Your payment history is a major determining factor in your credit score. In fact, it makes up 35% of your FICO® credit score. If you pay all your debt on time, you won’t see any negative marks from missed or late payments (which can take years to bounce back from).

3. Pay your monthly bills

Paying your credit card bills and loan payments on time is one of the most important financial habits you can adopt, and you may be able to get “credit” for non-credit bills, too. I recommend trying Experian Boost®1 to potentially raise your credit score in as few as several minutes. Experian Boost is a service provided by Experian, one of the three major credit reporting agencies.

Once you’ve signed up for a free Experian Boost account, connect your bank account(s) used to pay your bills and then choose and verify the positive payment history you’d like added to your credit report. You’ll then see any boost results immediately. The types of bills that work with Experian Boost include Netflix subscriptions, phone bills, and utility bills.

Experian Boost doesn’t guarantee an increase in your FICO® score, but using it will also never negatively affect your score because it only considers positive transactions.

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4. Become an authorized user

Becoming an authorized user on a credit card can be an easy to add a positive payment history to your credit report. This is a good option if you don’t qualify for a credit card yourself, and this method may help you boost your credit score faster than others. To do it, you’ll have to ask a family member or friend to add you as an authorized user to one of their credit cards. You may get your own card to use and receive any benefits the card provides, but the primary user doesn’t have to give you a card to help your credit.

As the primary user charges and pays off the credit card, that activity is reported on your credit. Your credit should build as long as the card is used responsibly.

Warning
Remember that the primary cardholder is responsible for any spending on the account. If you do end up using the card, be sure to make your monthly payments on time. I don’t recommend spending with a card for which you’re an authorized user if you have trouble budgeting.

5. Apply for a credit-builder loan

Credit-builder loans provide an opportunity for individuals who need to build their credit history but can’t qualify for most loans or credit cards. Credit-builder loans are specifically designed to help build credit, and they don’t often have any minimum credit score requirements for approval. They typically charge interest, but they can be well worth the cost if you want to build your credit and don’t have other options.

With this type of loan, a lender sets aside funds for you in a locked savings account, and you typically make monthly payments that the lender reports to the credit bureaus. You don’t receive a lump sum or funds upfront like you would with a typical personal loan. Instead, your funds are unlocked at the end of the loan term. Your credit history will show a successful repayment, which should reflect positively on your credit.

If you make your monthly payments in full and on time, your credit should start to build.

6. Check your credit regularly

You should check your credit score and credit report frequently to stay updated on changes. With a service like Credit Karma, you can see how your credit score is doing and what factors are affecting it. You can also access a free copy of your credit report from each of the major credit bureaus at AnnualCreditReport.com, but your report doesn’t include your score.

Warning
You should never pay for a copy of your credit report. You’re entitled to free copies through AnnualCreditReport.com under federal law, and any service that promises to give you your report for a fee may be fraudulent.

7. Get a co-signer on a loan

If you need a loan but can’t qualify for one on your own with your credit, you can get help from a co-signer who has good credit. Having a trusted family member or friend sign for the loan with you can make your application more appealing overall to lenders and may help you get approved or even qualify for lower fees and interest rates.

However, there is a big fat caveat: Your co-signer is taking a risk by putting their name onto a loan contract along with yours, and they’ll be responsible for the loan if you can’t pay it off. If you miss payments or don’t uphold the terms of the loan agreement, both your credit and your co-signer’s credit could be negatively impacted.

What is credit and why does it matter?

Credit typically means borrowing money from a lender and then paying it back later, often with interest. You'll need a sufficient credit score to qualify for most credit cards or loans. This score — along with your larger credit profile — helps lenders determine whether they should give you money by providing insight into your borrowing habits, payment history, current debt, and more.

If you always make on-time payments on your debts and have a combination of accounts, you can work up to a good credit score and access to better lending products.

Three major credit bureaus provide credit reports: Experian, Equifax, and TransUnion. These reporting agencies keep track of your credit and build a report that displays the following:

  • Information about your credit accounts, including how many you have, your payment histories, balances and limits, and when you opened each
  • Delinquencies such as bankruptcies and liens
  • Recent credit inquiries

Your credit score is usually shown as a FICO® score or a VantageScore number, depending on the report. Both credit scoring models range from 300 to 850, with 850 being the highest attainable score. A FICO score of at least 670 is considered good, a score between 580 and 669 is fair, and a score below 579 is poor. Most people start with FICO scores of around 300.

FAQs

How fast can you realistically build credit?

For someone starting with no credit, it can take at least six months to generate a FICO score from the major credit bureaus. For someone who is trying to build credit from a lower score or fix a damaged credit score, the timeframe can take years, depending on what is keeping your score low.

What habits lower your credit score?

Several habits can affect your score negatively, but there are a couple that are the most impactful. Making late payments is the fastest way to lower your score, as payment history accounts for 35% of your credit score, and a missed payment will stay on your credit report for seven years. Other factors include using too much of your credit lines, applying for too many credit accounts, defaulting on a loan, and sending a bill to collections.

What credit score do you start with?

Before you open your first line of credit, you start out with no credit score at all. Without a credit history, the credit bureaus cannot determine a score. 

Bottom line

Once you know how to build credit, it becomes easier to improve and maintain your credit throughout your life. Of course, you’ll need to put in the time and effort to establish good financial habits, like routinely checking your credit score and always paying your debt on time.

As you become better at managing your credit, though, your overall financial expertise will increase, and you’ll find more opportunities available to you. If you can work your way up to an excellent credit score, you’ll increase your chances of qualifying for most credit cards and the best personal loans, which can be helpful for reaching your financial goals.

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