How To Start Building Credit

Are you a credit newbie? Do you find it hard to get approved because your credit score is low or nonexistent? You’ve come to the right place!
You’ve probably heard people say, “To get credit, you need to have credit.” Well, that can be a tough nut to crack if you don’t have any, to begin with.
Read our guide on how to start building credit. We’ll help you get over that hurdle of credit history and get you started on the right path to boosting your credit score.

How Credit Works

Having good credit is like having the key to the kingdom. You get exclusive perks and advantages you wouldn’t otherwise be privy to.
Basically, credit refers to money that a financial institution lends you. Whether a bank or credit card company, these institutions issue monthly credit reports. Each report contains details of your balances, payment history, and other relevant information.
Then, credit reporting agencies (CRAs) collect these reports and keep a credit file of your transactions. When it’s time to buy or rent a home, for example, landlords will head to that file to check out your credit report. It helps them determine whether you’re trustworthy enough to complete the transaction.
They’ll take a look at how consistent you are with your payments. If there’s a pattern of late or missed pay-outs, they’ll most probably deny you the rent or loan based on your low credit score.

How to Start Building Credit

When you have no credit history, you’re referred to as having ‘credit invisibility.’ This can make your life difficult. You’re left with a limited number of options, which can leave you feeling overwhelmed.
Below are some reliable ways to start building your credit. Remember, developing a solid credit history takes time, and that there are no shortcuts.
That said, let’s go over a few tips that can help you build your credit.

Become an Authorized User

Do you have someone in your life who trusts you with their credit card? A parent or a sibling?
If yes, then ask them to make you an authorized user on their card. This means you can make purchases and other charges using the card. Yet, you’re not actually responsible for making payments or for the card itself in any way.
Being an authorized user means you make the most of their solid credit history to boost yours. Watch out, though, because it can be a double-sided sword. Just as you can benefit from their stellar credit, you can harm their credit standing, and yours, if you don’t act responsibly. Take Out a Credit-Builder Loan
Credit-builder loans can be lifesavers, providing you organize your payments. The way they work is that credit unions provide users with small loans. These can be anything from $300 up to $1,000.
Besides getting some cash, these loans are meant to help you start building credit. The lender reports each monthly installment to credit agencies. In return, this helps improve your overall score.
It’s worth mentioning that a credit-builder loan is different from a regular loan where you get the money upfront. With the former, the lender puts the money into a savings account or a certificate of deposit (CD). Then, once the loan has been paid off, the lender grants you full access to the money.

Pay Your Bills on Time

This is one of the most important ways you can start building your credit. It shows you’re committed, responsible, and understand the importance of good credit history.
There’s a catch, though. Paying bills can be a hefty chore, especially if you lose sight of the big picture. The best way to avoid missing a payment is to write down the names of all the bills you have to pay for that month. This includes utilities, rent, doctor’s bills, and everything in between. Each time you make payment, cross it off and get ready for the next one.
The major question many ask is, “What happens if I can’t make a payment on one of these bills?” The best thing you can do in this situation is to contact your creditor, explain your situation, and try to come up with a payment plan that suits you both.

Set Up a Joint Account or Co-Sign a Loan

This is slightly similar to being an authorized user. The main difference is that the two of you are now responsible for making payments on time. Any late payments will affect their credit, as well as yours.
So, how does it work? Find someone with a good line of credit. Then, set up a joint account or get them to cosign a loan with you.
That’s it! Now, simply sit back and let their solid credit history build yours up.

Apply for a Secured Credit Card

If you have no credit history, chances are you won’t be able to get a traditional unsecured credit card. The reason is these cards don’t need a security deposit. They’re mainly issued to those who have solid credit scores and history.
Since you have neither, the alternative is to get a secured card. These little aides can play an important role when you’re starting to build up your credit. It’s referred to as a “secured” card because, in order to open an account, a security deposit must be made, which becomes the card’s credit limit. You can use it to make purchases in virtual or in-person stores as you would with an unsecured card.
After some time, you can put in a request for a traditional card based on your good credit. Some credit card companies will even help you with the switch. In some cases, you won’t even need to close your primary line of credit.


Learning how to start building credit is essential if you plan to buy or rent anything of real value. Setting up and maintaining an impressive credit score won’t happen overnight.
It sounds a bit intimidating, but it’s actually easier than it sounds. You just need to be responsible and organized. More importantly, make sure your payments are sent in on time.
If you consciously make it a point to stay on top of things, your credit will start to develop slowly, but surely. After that, it’s all about taking advantage of all the perks of having good credit and everything it has to offer.