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Home Credit Repair How to Build Credit (At Any Stage)

How to Build Credit (At Any Stage)

How to build credit

At a glance

You can build your credit by paying your bills on time, getting a credit-builder loan, and applying for a secured credit card. Read on to learn how to start building your credit.

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Written by Samuel Osbourne

Reviewed by Robert Jellison and Victoria Scanlon

Apr 21, 2022

Fresh advice you can trust

We promise to always deliver the best financial advice that we can. That's our first priority, and we take it seriously. Our writers and editors follow strict editorial standards and operate independently from our advertisers and affiliates. Learn more about how we make money.

If you’re new to the world of credit, then credit building can be daunting—especially since you usually need to have a credit account already. You may be feeling stuck if lenders are turning you away due to an insufficient credit history or poor credit.

Whether you’re starting from scratch and trying to build credit at 18 or you’re preparing for a major financial move like taking out a mortgage or auto loan and want to qualify for the best interest rates, there are simple ways you can build credit fast.

Table of Contents

  1. 1. Build credit with a credit card
  2. 2. Use credit-building tools
  3. 3. Practice good credit habits
  4. 4. Monitor your credit reports and scores
  5. How credit-building affects your credit score

Here are the four best ways to build credit:

Four ways to build credit

1. Build credit with a credit card

Credit cards are a common entry route to credit because they’re easy to use and don’t require a huge financial commitment. However, the benefits you’ll get depend on how you use your card. Since your activity will be added to your credit report, responsible spending can help you build credit, whereas maxing out your cards or making late payments can do a lot of damage.

How to get a credit card if you have poor (or no) credit

There are several great first credit cards that you can choose from if you’ve never had a credit card before. Before applying for one, check that the card issuer reports to all three credit reporting agencies and compare interest rates to make sure you’re getting a card with a good annual percentage rate (APR).

You have four main options for building credit with a credit card if you’re completely new to credit or your credit has been damaged.

Get a secured credit card

Unlike the case with a traditional credit card, you can get a secured credit card (sometimes called a credit-builder card) with no credit history because there’s essentially no risk for your lender.

When you get a secured credit card, you’ll have to put down a refundable security deposit, which will become your credit limit. Your lender will keep this security deposit if you fail to repay your debts. Your credit will improve as your creditor reports your credit card payments to the credit bureaus and they contribute to your payment history. 1

Credit Card Best For Credit Score Annual Fee Welcome Bonus
Discover It secured credit card Discover it® Secured Credit Card Secured Credit Cards Overall 300–850 $0 Discover’s Cashback Match
OpenSky Secured Visa credit card OpenSky® Secured Credit Visa® Card No Credit Check 300–850 $35 See terms*
Self Visa credit card Self Visa® + Credit Builder Account Beginners 300–850 $25 See terms*
Bank Americard Secured credit card BankAmericard® Secured Credit Card No Annual Fee 300–850 $0 See terms*
First Progress Platinum Select Mastercard secured credit card First Progress Platinum Select MasterCard® Secured Credit Card Bad Credit 350–850 $39 See terms*
Citi Secured Mastercard credit card Citi® Secured Mastercard® Rebuilding Credit 300–669 $0 See terms*
View All Secured Credit Cards
Credit Card Best For Credit Score Annual Fee Welcome Bonus
Discover It secured credit card Discover it® Secured Credit Card Starters Overall 300–850 $0 Discover’s Cashback Match
First Progress Platinum Select Mastercard secured credit card First Progress Platinum Select MasterCard® Secured Credit Card Beginners 350–850 $39 See terms*
Discover it student cash back credit card Discover it® Student Cash Back Students 580–850 $0 Unlimited Cashback Match
Petal 2 cash back no fees visa credit card Petal® 2 "Cash Back, No Fees" Visa® Credit Card No Annual Fee 500–850 $0 See terms*
OpenSky Secured Visa credit card OpenSky® Secured Credit Visa® Card High Approval Odds 300–850 $35 See terms*
Capital One Platinum credit card Capital One® Platinum Secured Credit Card Building Credit 300–850 $0 See terms*
View All Starter Credit Cards
Credit Card Best For Credit Score Annual Fee Welcome Bonus
Discover It secured credit card Discover it® Secured Credit Card No Credit Overall 300–850 $0 Discover’s Cashback Match
First Progress Platinum Select Mastercard secured credit card First Progress Platinum Select MasterCard® Secured Credit Card Starters 350–850 $39 See terms*
Discover it student cash back credit card Discover it® Student Cash Back Students 580–850 $0 Unlimited Cashback Match
OpenSky Secured Visa credit card OpenSky® Secured Credit Visa® Card No Credit Check 300–850 $35 See terms*
Petal 2 cash back no fees visa credit card Petal® 2 "Cash Back, No Fees" Visa® Credit Card No Annual Fee 500–850 $0 See terms*
Total Visa credit card Total VISA® Credit Card No Deposit 300–660 $48–$75 No cash advance fee for the first year
View All No Credit Credit Cards
Credit Card Best For Credit Score Annual Fee Welcome Bonus
Discover It secured credit card Discover it® Secured Credit Card Bad Credit Overall 300–850 $0 Discover’s Cashback Match
Surge Mastercard credit card Surge Mastercard® Unsecured Credit Card No Deposit 300–850 $75–$99
First Progress Platinum Elite Mastercard Secured credit card First Progress Platinum Elite MasterCard® Secured Credit Card No Hard Inquiry 300–850 $29 See terms*
First Progress Platinum Prestige Mastercard secured credit card First Progress Platinum Prestige MasterCard® Secured Credit Card Low APR (Low Interest) 300–850 $49 See terms*
First Progress Platinum Select Mastercard secured credit card First Progress Platinum Select MasterCard® Secured Credit Card Establishing Credit 350–850 $39 See terms*
OpenSky Secured Visa credit card OpenSky® Secured Credit Visa® Card No Credit Check 300–850 $35 See terms*
Credit One Platinum Visa credit card Credit One Bank® Platinum Visa® for Rebuilding Credit Unsecured 450–680 $75 See terms*
View All Bad Credit Credit Cards

Become an authorized user

You can build credit fast by becoming an authorized user on a family member’s or friend’s credit card account. The process usually involves the card issuer adding the primary cardholder’s payment history to your credit report, which will lengthen your credit history and boost your credit score if they’re a responsible borrower.

However, it’s worth noting that being an authorized user affects your credit score in the reverse as well—it will fall if the primary card user doesn’t make on-time payments or uses too much of their credit limit. You should also make sure that the credit card company reports authorized users to the credit bureaus—your credit will only benefit if they do.

Get a cosigner

If you’re starting to establish credit from scratch or you have a bad credit score, then qualifying for an unsecured credit card can be difficult since many companies impose a minimum credit score requirement for these credit cards. You’ll have a lot more options if you ask a family member or close friend to be a cosigner on your credit card application.

Bear in mind that your cosigner will be accepting responsibility for repaying your debts if you stop making payments. For this reason, you should both weigh the pros and cons and not make the decision lightly.

Get a credit card with no credit score requirement

More and more companies are responding to the demand for credit cards among people with no credit score or poor credit by using criteria other than your credit score to assess your creditworthiness.

If you want an unsecured card but don’t want to get someone else involved by becoming an authorized user or getting a cosigner, then you may be able to qualify for one of these alternative cards with no minimum credit score requirement:

  • Petal® 2 Visa® “Cash Back, No Fees” credit card
  • Total Visa® credit card
  • Deserve® PRO Mastercard®

Note that some unsecured credit cards for people with no credit require a fee, and you may only be offered relatively low credit limits. However, these cards have the advantage of allowing you access to an unsecured credit line without help from someone else.

You don't need to carry a credit card balance to build credit

It's a common misconception that you should keep a small balance on your credit cards to build credit. This will only cost you more in interest. As long as you use your card occasionally to keep it active, having a zero balance will actually help (rather than hurt) your credit since the major credit scoring models reward consumers who have fewer accounts with a balance. 2
3

2. Use credit-building tools

Building credit is difficult if you have a short credit history (or no credit history) because you won’t qualify for most loans and credit cards. Fortunately, there are credit-building tools out there that you’ll be able to access even with no credit history.

Credit-builder loans

Unlike traditional installment loans, credit-builder loans don’t immediately give you access to money you’ve borrowed, and they don’t require a good credit score. Instead, your lender will deposit your credit-builder loan into a savings account, which you won’t be able to access until you’ve repaid the full amount.

Typical loan amounts range from $300 to $1,000, and you pay the loan off in installments over 6 to 24 months. 4 You can get these loans from banks or credit unions. As you repay the debt, your lender will report your loan payments to the credit bureaus, which will boost your credit score.

Rent and bill reporting services

Opening a new credit line isn’t the only way to establish credit. What many people don’t know is that you can also get credit for paying your regular monthly bills and rent. Either sign up for a paid reporting service (such as Rental Kharma, LevelCredit, or PayYourRent) or a free bill-reporting service like Experian Boost.

Experian Boost will give you credit for your payments toward phone bills, utilities, and streaming services like Netflix. However, this will only increase your Experian credit score—your TransUnion and Equifax scores won’t change.

Boost your credit with the bills you're already paying

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Unfortunately, although older FICO scoring models incorporate bill payments into the calculation of your credit scores, FICO 8 and earlier models don’t factor in rental payments. 5 However, FICO 9 and all the VantageScore models factor both rent and bill payments. 6 7

3. Practice good credit habits

While having open tradelines and active accounts on your credit report is a necessary first step to building credit, you’ll also need to practice the following good credit habits to get and maintain a good credit score:

  • Pay your bills on time: Arguably the best thing you can do to build credit is to make consistent on-time payments toward your credit accounts. Creditors usually report payments as late if they’re more than 30 days overdue, and this can significantly damage your credit score. 8
  • Don’t overspend on credit accounts: One of the fastest ways to improve your credit score is to reduce your credit card balances. This is because your debt-to-credit ratio (or credit utilization ratio) is a major component of your credit score. VantageScore recommends using below 10% of your credit limit. 9
  • Keep your credit card accounts open: You might be tempted to close any credit accounts you’re not using once you’ve built up some credit, but closing credit cards will actually hurt your score. It’s generally better to keep your cards open so that you keep your credit limits high (and credit utilization low) and the accounts continue to positively contribute to your payment history.
finance jar gold coin

Set up automatic payments to your lender

If you struggle to keep track of your bills, you can set up autopay to make sure you never forget to pay them on time. Alternatively, you can log into your bank account and schedule a recurring payment to your lender.

4. Monitor your credit reports and scores

Actually checking your credit reports and credit scores is one of the most important steps in credit building. Credit monitoring allows you to see the consequences of different credit actions, spot problems or errors early on, and stay motivated.

You can request free copies of your credit reports from all three major credit bureaus at AnnualCreditReport.com. Your creditors may provide you with your credit scores for free, but if not, you can also sign up for a paid credit-monitoring service. Don’t worry: checking your credit score won’t lower it.

How credit-building affects your credit score

When you start taking steps to build credit, it’s important that you understand how credit works and how different credit actions impact your credit score.

These are the main factors that contribute to your credit score:

  • Payment history: The timeliness of your payments on all your credit accounts.
  • Credit utilization rate: Your debt-to-credit ratio, or the amount of credit you’re using compared to your total credit limit.
  • Length of credit history: How long you’ve been using credit and how long you’ve kept your accounts open.
  • Credit mix: The diversity in the types of credit accounts you have (e.g., revolving credit and installment loans).
  • New credit: The number of hard inquiries you have from recent credit applications.

Here’s a look at how these factors break down in the major credit scoring models used by lenders:

Main Credit-Building Factors for Improving Your FICO Score

FICO credit score factors pie chart
When building credit, focus on your payment history and the amount of debt you have since these are the main factors contributing to your FICO score.

Main Credit-Building Factors for Improving Your VantageScore

VantageScore credit scoring factors pie chart
Payment history is incredibly important in VantageScore’s models, so when building credit, focus on never missing any payments.

Note that, although there are differences between FICO and VantageScore, they take basically the same factors into account when calculating your credit score, even if they weight these factors slightly differently and refer to them by different names.

How long does it take to build credit from scratch?

It can take a long time to build credit from scratch. You won’t receive your first FICO score until you’ve had a line of credit for at least 6 months, although you’ll receive your first VantageScore as soon as any activity is added to your credit report (typically 1 month after you open your first credit account). 10 11

You might expect your first credit score to start at 300 (the lowest possible credit score in the standard VantageScore and FICO models), but it usually won’t be that low. If you follow the tips above, you can begin taking advantage of the benefits of good credit early on, although your score will usually improve as the length of your credit history increases and you demonstrate your creditworthiness.

Takeaway: You can build your credit by using low-risk credit accounts to establish a good payment history

  • Building your credit isn’t a fast process. You won’t have a credit score until you have a credit account that’s at least six months old (FICO) or one month old (VantageScore).
  • The best ways to build credit include paying your bills on time and maintaining low balances on your credit accounts.
  • You can also build your credit by becoming an authorized user on someone else’s credit card or taking out a credit-builder loan or secured credit card.
  • If you want to build your credit without getting a new credit card or loan, you can use rent and utility reporting services to add your rent and bill payments to your credit report.

Article Sources

  1. Consumer Financial Protection Bureau. "Differentiating Between Secured and Unsecured Loans" Retrieved September 30, 2021.
  2. myFICO. "What Is Amounts Owed?" Retrieved April 19, 2022.
  3. VantageScore. "Did You Know All About Impact of Percent of Credit Limit Used?" Retrieved April 19, 2022.
  4. Consumer Financial Protection Bureau. "Targeting Credit Builder Loans" Retrieved September 30, 2021.
  5. FICO. "Leveraging Alternative Data to Extend Credit to More Borrowers" Retrieved September 30, 2021.
  6. VantageScore. "The Advantage of Adding Rent and Utility Data to the Credit File" Retrieved April 18, 2022.
  7. FICO. "Leveraging Alternative Data to Extend Credit to More Borrowers" Retrieved April 18, 2022.
  8. Equifax. "When Does a Late Credit Card Payment Show Up on Credit Reports?" Retrieved September 30, 2021.
  9. VantageScore. "Debunking a credit score myth: Forget what you’ve heard. Use much less than 30% of your available credit card limit" Retrieved September 30, 2021.
  10. FICO. "To Score or Not to Score?" Retrieved September 30, 2021.
  11. VantageScore. "When Your FICO Score Is NOT The Best To Track" Retrieved September 30, 2021.

Samuel Osbourne

Content Writer

View Author

Sam Osbourne is a content writer for FinanceJar. His writing covers credit scores, credit repair, and renters insurance. He’s worked across a mixture of genres, including blogs, essays, and fiction. Sam has a Master’s degree in Creative Writing.

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