How to Build Credit
Building credit can feel confusing when you're starting from the beginning. Many people hear that credit is important, but they don't know how to build it if they have never borrowed money before.
The challenge is that lenders often want to see a history of responsible credit use before approving you for additional credit. But creating that history requires having credit in the first place.
This can feel like a difficult cycle to break.
Fortunately, there are several ways to begin building credit safely and responsibly.
Where to Start
Before trying to build credit, it helps to understand where you currently stand.
Some people assume they have no credit, but they may already have information appearing on their credit report.
You can check your credit reports for free yearly (some platforms offer more often) using:
Once you have an idea of where you are starting, it become a lot easier to start building.
Even without established credit, there are quite a few options to start building it up.
Open a Secured Credit Card
A secured credit card is one of the most common tools for people who are new to credit. A secured credit card works similarly to a traditional credit card, but it requires a refundable security deposit.
For example:
You provide a $300 deposit, and
the credit card company gives you a $300 credit limit.
The deposit protects the lender if payments are not made, which makes secured cards easier to qualify for compared to many traditional credit cards. Some secure cards offer lower deposits, however all of them require some form of payment prior to use.
There are many options for secure cards because are less risky for the lender. Some available options are:
You use the card for purchases, make payments, and build a credit history through responsible use. Over time, responsible use may allow you to qualify for a regular credit card and eventually receive your deposit back.
Become an Authorized User
One way to begin building credit is by becoming an authorized user on someone else's credit card account.
An authorized user is someone who is added to another person's credit card account and may receive their own card, but they are not the person responsible for paying the bill.
For example, a parent may add their child as an authorized user to help them begin establishing credit.
This can be beneficial when you're added to a card of someone you trust. While it may help build your credit, there is also risk involved.
If the person who owns the card has bad payment history or poor credit usage, it can affect your credit negatively. Think of being an authorized user as splitting the responsibility. You are authorized to use the card, but you also have the same expectations from the credit card company of repaying it.
Use a Credit Builder Loan
Some financial institutions offer credit builder loans specifically designed to help people establish credit. Unlike a traditional loan where you receive money upfront, a credit builder loan typically places the borrowed amount into a secured account while you make payments. Once the loan is paid off, you receive access to the funds.
The purpose is to create a record of making installment payments on time. These payments are then reported to the credit bureaus.
A few examples of these are:
As with any financial product, review the terms carefully and make sure the cost is worth the benefit.
Building Credit Through Bills You Already Pay
You may already have opportunities to build your credit through bills you are paying every month. Rent, utilities, cell phone bills, streaming services, and other recurring expenses can sometimes be reported to credit bureaus through credit-building programs.
There are several services that can help you look into this option. Each one has its own requirements, eligible bills, fees, and credit bureaus it reports to, so take a few minutes to see which options fit the bills you already pay. However, they do present the option to avoid taking out credit or paying a deposit to get started.
If you consistently pay certain bills on time, it may be worth checking whether those payments can be added to your credit history. You are already making the payments, so this can be another option to explore when you're working on building credit.
Building Credit Takes Time
One of the hardest parts of building credit is understanding that it takes time for it to show the progress you're making. Don't be discouraged. The hard work will pay off.
A strong credit history is built through repeated positive actions over time.
There is no shortcut that replaces:
Making payments on time.
Managing balances responsibly.
Keeping accounts open when appropriate.
Avoiding unnecessary debt.
The habits you build early can affect your financial opportunities for many years.
Final Thoughts
Building credit from scratch may feel intimidating, but it is a process that anyone can learn.
You do not need a high income or a large amount of money to begin. You need responsible habits, consistency, and an understanding of how credit works.
A strong credit history is built one decision at a time. By starting carefully and using credit as a tool rather than relying on it for everyday expenses, you can create a foundation that supports your future financial goals.
Up Next: Once you begin building credit, one of the most important tools you may use is a credit card. In the next article, we'll explain how credit cards work.
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