How to Build Your Credit

Building a strong credit history is essential for numerous financial milestones, from getting favorable loan rates to qualifying for housing. Whether you’re starting from scratch or trying to repair a tarnished score, these steps can guide you:

1. Understand Your Credit Report

Before building or rebuilding credit, get a copy of your credit report from major credit bureaus. Review it for errors or discrepancies and dispute any inaccuracies.

2. Start with a Secured Credit Card

If you’re new to credit:

  • Apply for a secured credit card, which requires a cash deposit, usually equal to your credit limit.
  • Use the card for small purchases and pay off the balance in full each month.

3. Become an Authorized User

Ask a family member or friend with good credit to add you as an authorized user on their credit card. You’ll benefit from their positive payment history, which can boost your score.

4. Pay Bills On Time

  • Your payment history is a significant factor in your credit score.
  • Set up automatic payments or reminders to ensure you never miss a deadline.

5. Limit Hard Inquiries

  • When you apply for credit, a “hard inquiry” is recorded on your report. Multiple inquiries in a short period can negatively impact your score.
  • Only apply for new credit when necessary.

6. Keep Balances Low

  • Aim to use 30% or less of your available credit. High credit card utilization can hurt your score.
  • If you have balances, work on paying them down.

7. Diversify Your Credit Mix

While it’s not the most critical factor, having a mix of credit types (credit cards, retail accounts, installment loans, mortgages) can enhance your score.

8. Avoid Closing Old Accounts

  • Length of credit history affects your score. Keep your oldest accounts open and active.
  • Closing an account can also impact your credit utilization ratio.

9. Consider a Credit Builder Loan

Some banks and credit unions offer credit builder loans. These loans are designed specifically to help individuals build or rebuild their credit.

10. Regularly Monitor Your Credit

  • Sign up for free credit monitoring services.
  • Regularly review your report for any signs of fraud or inaccuracies.

11. Limit New Debt

While taking on debt wisely can help build credit, accumulating too much can have the opposite effect. Always consider your ability to repay before taking on new debt.

12. Stay Educated

Stay updated with changes in credit scoring models and continually educate yourself on financial literacy topics.

13. Seek Professional Advice

If you’re struggling to improve your score, consider working with a credit counseling agency. They can provide guidance and resources to help you manage debt and build credit.


Building or rebuilding credit is a marathon, not a sprint. With consistent effort and smart financial habits, you’ll see gradual improvement in your credit score over time. Remember, the foundational principle is to demonstrate that you can responsibly manage and repay debt.