How to Build Credit

Building credit is important. Why? Solid credit can help you get approved for loans and credit cards.

Good credit can open doors in your life and get you the best financing – if you play it smart.

A simple and effective way to build credit is to become an authorized user on someone else’s credit account. If you have a family member or a partner with good credit, see if you can be an authorized user on his or her credit card.

As an authorized user, you can use that credit card without being legally responsible for the balance. This means you’ll have to discuss this with the primary cardholder to ensure you are on the same page with your payment arrangement.

Min./Max. Amount
Est. APR*
Funding Time
Name climb Credit business loan lender logo
Read our Review
Min/Max amount $1,500 - $2,500
Est. APR* 15.9%
Funding Time48 hours
More details
  • Save money while you build your credit
  • This is a credit building program that BUILDS your credit score
  • If you have poor credit or have little to no credit history – this is for you!
  • No up-front cash is provided.
  • A credit-builder account holds the amount borrowed in a bank account while you make payments and build credit. When the loan is paid off, the money is released to you.
Min./Max. Amount
Est. APR*
Funding Time
Name Refresh Financial logo
Read our Review
Min/Max amount $1,200 - $5,500
Est. APR* 17.99%
Funding Time48 hours

2. Get a co-signer

If you don’t have any credit or have low credit, it can be difficult to get approved for a car loan or private student loan.

If you’re in this boat, you can get a co-signer with good credit to help you get approved. Your co-signer is legally responsible for your balance if you fail to pay.

Make sure that you can afford the monthly payments as this way you won’t leave your co-signer stuck paying off your purchases. If you use your card responsibly, that co-signer can help you get approved for a loan and build your credit history.

3. Pay back your student loans

Did you know that your student loans are a part of your credit history? It’s true. This is why it’s important to start paying these off as soon as you can. Making payments on time, in turn, can help you build credit and establish a better credit score.

4. Apply for the right credit card

Credit History and LoansGetting a credit card typically requires having an established credit history. It’s kind of like a chicken and egg problem.

You need credit to get approved for a credit card. But, how can you build credit if you can’t get approved for a loan or credit card without it?

Luckily, there are a few credit card options that are ideal if you’re looking to build credit. For example, consider applying for a secured credit card. But what is a secured credit card exactly? Secured credit cards are credit cards that requires security deposits as collateral. This is a way for the credit card company to lower its risk.

Your deposit will be held if you don’t end up paying back your balance. Secured credit cards are a safe way to build credit, and you’ll need to have a security deposit upfront. Here are two secured credit cards to consider:

How to Increase Your Credit Score

So, you’re now on your way to building your credit. That’s great! Here’s more good news: there are 5 simple yet effective moves you can make to help raise your credit score. Take a look:

Paying Your Bills On Time Makes You More Credit Worthy1. Pay your bills on time

This may seem obvious but your payment history is a huge factor when trying to build credit. When lenders approve you for credit they want to know that you’re “creditworthy.” In other words, lenders want to feel confident that you’ll actually pay back what you owe

So, if you can build your payment history and show that you have a good track record, you can effectively build credit and your “creditworthiness.”

To help you pay your bills on time, consider opting for automatic payments or create calendar reminders of important payment due dates. Remember: missing a payment can adversely affect your credit.

2. Keep an eye on your balances

What you may not realize is that your account balances on your credit card can have an impact on your credit score.

Yes, it’s true. If you have a credit card and are maxing it out each month, that can sound an alarm to prospective creditors. If you have racked up a lot of debt in comparison to your income — also called your debt-to-income ratio — that’s another red flag.

So, if you want to build credit, keep your balances low and only borrow what you need.

3. Pay off your balances

As noted above, it’s important to pay your bills on time. But, if you have a credit card or are planning to get one, it’s a good idea to pay off your balances in full. While you may think it’s helpful to carry a balance, that’s actually a myth!

If you can’t pay your balance in full every month, at least pay the minimum payment.

4. Don’t open too many accounts

Did you know that your credit is checked when you open a new line of credit? Each time you do this, these credit inquiries can cause a drop in your credit score.

If you’re trying to boost your credit score, it’s important that you don’t have too many credit inquiries. For this reason, only apply for the credit that you need and be mindful of opening new accounts.

Bottom line

By following the advice here, you’ll be on your way to building credit. It’s all about using the right tools to your advantage and making payments on time. On top of that, keep your balances low and only borrow what you need.

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