How to build your credit 

Having a good credit score opens the door to a world of opportunities, not to mention lower interest rates when you borrow money. Unfortunately, we’re not born with a high credit score—we must build one.  

So, how do you build your credit? First, let’s look at the importance of building credit as early as possible and some key considerations to think about. Then, we’ll break down six tips to help you start your credit-building journey. 

The importance of learning how to build credit early 

Consider starting to build credit at 18 or younger if you can. The earlier you start using credit responsibly, the faster you build a longer credit history—a crucial factor in determining your creditworthiness. A long, positive credit history demonstrates to lenders that you can manage debt reliably over time.  

Building credit in your early to late teens or twenties helps you establish a solid financial foundation before facing major life milestones like buying a car, renting an apartment, applying for a mortgage, or even getting a job. Building good credit also opens doors to better loan terms and lower interest rates. These benefits can save you significant money and make important life goals more attainable.  

Ultimately, building credit early sets you up for better financial opportunities and greater independence in adult life. But don’t stress if you didn’t start building credit as early as you could. There’s still time to start your credit journey and build up your score. 

Considerations for building your credit score 

There are a couple of factors to remember when building your credit score. You’re likely just getting started with credit, after all. Once you develop good credit-building habits, you’ll be on the way to a high credit score in no time.  

Here are some key considerations to keep in mind when building credit:  

• Are you starting from scratch? Building credit from scratch may seem daunting, but remember, we’ve all been there. If your first credit score is lower than anticipated or even non-existent, that’s normal.  
• Do you have someone you trust to help you? Having someone you trust to help you along your credit-building journey is helpful. Not only can they give you guidance and advice, but they may also let you become an authorized user on their credit card account or co-sign a loan with you, which can help you start building credit early on.  
• Are you financially responsible? Being financially responsible is important when building credit. Your payment history has one of the biggest impacts on your credit score, so you must ensure you’re always on top of your bills and never miss a payment.  
• What are your financial goals? Is your goal to rent an apartment? Buy a house? Get a loan to start your own business? Regardless of your goals, you likely need a high credit score to achieve them.  

6 tips on how to build your credit 

Building credit isn’t as complicated as you may think. Below, we’ll explore six techniques on how to build up your credit, including: 

1. Open a credit card 
2. Become an authorized user 
3. Get a loan 
4. Use a cosigner 
5. Have a good credit mix 
6. Learn good credit habits 

1. Open a credit card 

Opening and using a credit card is one of the most common ways to build credit. But there are a couple of different types of cards you can choose from, some of which are designed for those who don’t have a credit score yet:  

• Secured credit cards: These cards are designed specifically for people starting to build their credit. To open a secured credit card, you must submit a security deposit to the issuer upfront. This deposit is collateral if you don’t pay your bill and typically represents your credit limit.  
• Once opened, you’ll use a secured credit card just like a regular credit card: you’ll buy things, make timely payments, and potentially earn interest if you don’t pay your balance in full on time. Responsible use of a secured card can help you graduate to an unsecured card with higher limits and more benefits in the future. 

• Student credit cards: If you’re currently enrolled in college, student credit cards can be a good option to start building credit. These cards are designed with students in mind and often have lower credit requirements than traditional cards. Some of the perks you might find with student credit cards include: 
• Cash back or rewards: Earn money back on everyday purchases or points towards travel and merchandise. 
• Cell phone protection: Get reimbursed for repairs or replacements if your phone is damaged or stolen (with certain conditions). 
• Building credit history: Responsible card use establishes a positive credit history, which is important for future financial goals. 
• Retail credit cards: Department stores or specific brands offer these cards. They’re often easier to qualify for than other types of credit cards, even if you have limited or no credit history. However, there are some trade-offs:  
• Limited use: These cards are usually only used at the affiliated store or within a specific brand network. 
• High interest rates: Retail cards often have higher interest rates than other cards, so paying your balance in full each month is important. 
• Tempting discounts: While they may offer enticing discounts or rewards on purchases, these can lead to overspending if you’re not careful. 

Become an authorized user 

Becoming an authorized user on a parent’s credit card (assuming they have good credit and the card issuer reports authorized users) can be a great way to start building credit at a young age. When you’re an authorized user, you can receive a credit card in your name that’s connected to your parent’s account.  

As the primary cardholder practices responsible credit habits like making on-time payments and keeping a low credit card balance, their positive credit behavior will reflect on your credit report and help you build a strong foundation. 

It’s important to remember that irresponsible habits by the primary cardholder, such as missed payments or maxing out the card, could also impact your credit as an authorized user. Before becoming one, clearly discuss expectations for using the card responsibly with the primary cardholder. 

While becoming an authorized user can help you kick-start your credit, consider opening your own credit card account once you have a foundational score to establish credit more effectively and boost your score faster. 

Get a loan 

Taking out a loan can be an effective way to build credit, as lenders like to see a mix of credit accounts on your report. But it’s essential to choose a loan that fits your needs and financial situation, and to prioritize responsible borrowing. Here are some loan options that can help you build credit: 

• Student loans: If you’re enrolled in college, student loans can help cover tuition and other expenses while contributing to your credit history. Make payments on time to show your ability to manage debt responsibly. 
• Auto loans: Buying a car with an auto loan can be a good way to build credit, especially if you have a down payment and can afford the monthly payments. Regular, timely payments on an auto loan can positively impact your credit score. 
• Secured loans: These loans are backed by collateral, such as a savings account or certificate of deposit. This lowers the lender’s risk, making them easier to qualify for even with a limited credit history. 
• Credit-builder loans: These loans are specifically designed for building credit. You typically don’t receive the funds upfront—instead, the lender deposits them into a savings account. You make regular payments over a set period and once finished, you receive the funds plus any interest earned. This creates a positive payment history on your credit report. 

Use a cosigner 

Using a cosigner—someone who agrees to share legal responsibility for the debt with you—can improve your chances of loan approval, especially if you have no credit history, a low credit score, or lower income.  

A cosigner with good credit can help you secure better loan terms, potentially saving you hundreds of dollars in interest over the life of the loan. They can also help get you more flexible repayment options. Also, having a cosigned loan and making timely payments can help you build or improve your credit history, as the account will appear on your credit report. 

However, using a cosigner comes with some risks and extra responsibilities. Both you and the cosigner are equally responsible for repaying the loan, meaning that if you fail to make payments, the cosigner must legally cover them. This shared responsibility can put pressure on personal relationships and negatively impact both parties’ credit scores if payments are missed. Late or missed payments on a cosigned loan damage your credit and can significantly harm the cosigner’s credit score, making it harder for them to borrow in the future. 

Before asking someone to be a cosigner, discuss your repayment plan, financial responsibilities, and the potential risks for both of you. 

Have a good credit mix 

A good credit mix—the variety of credit accounts you have on your credit report—can help build your credit by showing lenders that you can responsibly manage different types of credit. This includes both revolving credit, like credit cards and lines of credit, and installment credit, like mortgages, auto loans, and personal loans. Credit mix accounts for about 10% of your FICO credit score, so having both types can boost your overall score. 

Managing different types of credit over time and maintaining a consistent history of timely payments helps you establish a stronger credit history. Lenders often view a diverse credit mix favorably, as it shows you can juggle multiple financial responsibilities. However, it’s important to open new credit accounts only when necessary and avoid too many credit applications, as they can negatively impact your score.  

Learn good credit habits 

Creating good credit habits is the foundation of building and maintaining a strong credit score. Here are a few tips on how to establish those habits. 

1. Prioritize on-time payments: Consistently paying your bills on or before the due date is one of the most important factors in building good credit. Your payment history accounts for roughly 35% of your FICO score, so even a few late payments can significantly pull it down. Utilize automatic payments, calendar alerts, or reminder apps to keep due dates front and center, ensuring timely bill payments every time. 
2. Maintain a low credit utilization ratio: Credit utilization—the amount of credit you use compared to your available credit—is the second most critical factor in your credit score (about 30%). Aim to keep your credit utilization below 30% on each card and overall. This means if you have a $1,000 credit limit, try not to have a balance of more than $300. Paying your balance in full each month is ideal. 
3. Monitor your credit reports: At least once a year, check your credit reports from all three major credit bureaus: Equifax, Experian, and TransUnion. You can check your TransUnion and Equifax reports for free with Credit Karma. You can check your Experian credit report a few different ways, including directly through Experian or via freecreditscore.com (an Experian-owned service). Checking these reports lets you catch errors, spot signs of identity theft, and track your progress. 
4. Apply for new credit sparingly: Each credit application triggers a hard inquiry on your credit report, potentially causing a small, temporary dip in your score. To minimize this impact, apply for new credit strategically—only when you truly need it and are likely to be approved. 
5. Don’t close existing credit cards or accounts: Preserve your credit history by keeping older accounts open. Even unused credit cards can be valuable assets. If they don’t carry annual fees, keeping those older accounts active can boost your credit longevity and increase your score. 
6. Patience and persistence: Building a solid credit score is a marathon, not a sprint. It requires consistent effort and patience. Remember, setbacks happen, but don’t let them derail your progress. Instead, focus on cultivating positive financial habits like making payments on time, managing debt wisely, and using credit responsibly. 

Improve your financial health by learning how to build credit  

Knowing how to build a credit score is the first step in improving your financial knowledge and achieving a high credit score. Building up good credit takes time, so starting early is important. But with enough patience, dedication, and good habits, you can get that ideal score quicker than you thought possible.  

You can also speed up the process by enlisting the right tools. Credit Karma offers resources and tips to help you monitor your credit easily and understand other important financial literacy concepts to help boost your score. Create your account today and start your journey toward a better future. 

Want a little extra help in learning about how credit impacts your finances? Check out our free, self-paced financial literacy curriculum.