Building credit can be tricky without a credit history since you essentially need credit to build credit. Even though the first steps may sound intimidating, taking ownership of your credit will strengthen your financial foundation for the future.
You can build credit in several ways, from using a credit card and repaying loans to reporting your rent payments. The following guide outlines how to build credit, whether you just started your credit journey or need to boost your current score.
How to build credit with a credit card
One of the best ways to build credit is with a credit card. It might sound counterintuitive, but responsible use of a credit card can give your credit score a huge boost. Here’s how to do it.
- Get a secured credit card
- Become an authorized user
- Consider a student credit card
- Request a higher credit limit
Get a secured credit card
A secured credit card is a smart place to start if you’re building credit from scratch. When you open a secured credit card, you’ll make a cash deposit that acts as collateral. That deposit amount also equals your credit limit – so if you put down $300, your card limit is $300. If you default on the card, the issuer keeps your deposit and won’t be out of pocket.
Once you make your opening deposit, you can use your secured credit card just like a regular card. Use it to pay for everyday purchases like groceries, gas, or utility bills and pay off the balance each month. Doing this consistently can help you build a positive credit history.
Become an authorized user
Another way to use a credit card to build credit is to ask a friend or family member with a strong credit history to add you to their account as an authorized user.
As an authorized user, you can make purchases with their card as your own and have the account’s payment activity appear on your credit report.
All account activity on the card will show in your credit report, regardless of whether the activities are positive or negative. If the primary cardholder falls behind on payments or maxes the card out, your credit also suffers – and if you use your card irresponsibly, the owner’s credit score will be affected.
Consider a student credit card
If you’re a college student, consider applying for a student credit card. This type of card doesn’t typically require a deposit like a secured credit card, which is helpful if you don’t have enough for a deposit.
The issuer will run a credit report when you apply for a student credit card. However, student credit cards tend to have lower credit requirements than traditional unsecured ones. They can also offer rewards or cash back, which can help you cover everyday expenses in college.
Request a higher credit limit
If you already have a credit card and have been using it responsibly, consider asking the issuer for a credit limit increase. A higher credit limit can decrease your overall credit utilization and boost your score.
Read more: How to Increase Your Credit Limit
How to build credit without a credit card
Using a credit card isn’t the only way to build credit. Here are some alternative options to boost your credit score.
- Get a credit-builder loan
- Use a cosigner
- Report rent and utility payments
- Monitor your credit report
Get a credit-builder loan
A credit-builder loan is a great way to increase your credit score if you have no credit or limited credit history. You won’t need proof of good credit to be approved – you’ll just need to ensure you can afford to make the monthly payments.
With a traditional loan, you get a lump sum of cash and repay it to the lender over the loan term. With a credit-builder loan, you don’t get any money upfront; instead, you make monthly payments for the agreed-upon loan term and get the cash at the end of the term (plus any accrued interest).
The lender reports your monthly payments to the credit bureaus. Your credit score should increase as long as you keep up with your payments.
Use a cosigner
A bad credit score (or no credit history) can make it hard to get a loan or rent an apartment. A cosigner is someone with a good credit score who vouches for you and promises to take over payments if you default. Applying for a loan or a rental home with a cosigner increases your chances of approval – and it can also boost your credit score.
If you use a cosigner, remember that your financial behavior also affects them. If you fail to pay your loan, the cosigner’s credit score and yours can both take a hit.
Report rent and utility payments
If you lack credit history but always pay your rent and utility bills on time, consider using a rent-reporting service to add that information to your credit reports.
By linking your account, you can add on-time payments for rent, phone, and utility bills to your credit report, making it easy for new credit builders to build a positive payment history.
Monitor your credit report
Monitoring your credit report lets you spot potential errors so you can dispute them quickly before they affect your credit score.
Every year, you can request a free copy of your credit report from the three reporting bureaus – Experian, Equifax, and Transunion – through AnnualCreditReport.com.1
You might be able to check your credit score more frequently through your bank or a credit reporting service like Experian or MyFICO.
In addition to disputing errors, pay off any debts sent to collections as soon as possible.
Read more: How to Read a Credit Report
5 factors that affect your credit score
Knowing the top factors that impact your credit score empowers you to work toward boosting yours. Here’s what you need to know.
| Factor | % of FICOⓇ Score2,3 |
|---|---|
| Payment history | 35% |
| Amounts owed | 30% |
| Length of credit history | 15% |
| Credit mix | 10% |
| New credit | 10% |
Payment history: 35%
Your payment history has the most significant effect on your credit score. If you consistently pay bills on time, your credit score will increase. Conversely, your credit score will drop if you often miss or make late payments.
Scheduling automatic payments or adding payment reminders to your calendar can help ensure you pay your bills on time and don’t negatively affect your credit.
Amounts owed: 30%
The amount you owe compared to your total credit limit has the second-largest effect on your credit score. Keep your credit utilization (the amount you owe divided by your total available credit) below 30%.4
For example, if you have $10,000 available credit across several credit cards and lines of credit, you shouldn’t use more than $3,000.
Length of credit history: 15%
The third most influential factor on your credit score is the length of your credit history.5 The length is calculated using the ages of your newest and oldest accounts, the average age of all your accounts, and the length of time since you opened your last account. The longer your credit history, the better your credit score will be.
Preserve the age of your credit by keeping old accounts open even if you’re not actively using them. Additionally, avoid opening new accounts too often, as these will decrease the average age of your accounts.
Credit mix: 10%
There are two main types of credit: revolving credit and installment loans. Revolving credit includes credit cards and other lines of credit, while installment loans include mortgages, auto loans, and student loans.
Having a healthy mix of both can boost your credit score. If you only have credit cards, consider taking out a loan to improve your credit mix. While this factor might not significantly impact your credit score, it can help push it from “fair” to “good” if you’re a few points below the next range.
New credit: 10%
Finally, new credit can affect your credit score. Credit bureaus see new credit applications as risky financial behavior – mainly if you apply for several loans or lines of credit quickly. Avoid applying for new credit unless you really need it to limit credit inquiries.
Read more: How Many Credit Cards Should I Have?
How long does it take to build credit?
Building credit doesn’t happen overnight. It can take several months or more, depending on your financial habits. However, with consistency and dedication, you should start seeing changes to your credit score in 30 to 45 days.6
The time it takes to build credit also depends on your starting point. If you’re starting from scratch with no credit history, expect it to take at least six months to reach a good score.6 But if you’re working on repairing a damaged score, it might take a few months to a couple of years to start seeing real change.
You can build credit faster by using a secured credit card versus an unsecured one, taking out a credit-builder loan, and making monthly on-time payments. However, there’s no quick trick to getting and keeping a good credit score. Instead, you’ll need to be consistent with your good financial behavior or risk your score dropping again.
Start building credit now
By following these steps, you can start building credit and unlock financial progress™ with potential access to better loan terms, lower credit card rates, and better perks and rewards.
Ready to take action and boost your credit? Apply for the Chime Credit Builder Secured Visa® Credit Card.
Learn more about how Credit Builder can boost your credit score so you can reach your financial goals faster.
Frequently Asked Questions
How do you build your credit fast?
Your payment history has the most significant impact on your credit score. Prioritize making on-time payments each month to give the biggest boost to your credit score.
Can you get a 700 credit score in six months?
Getting a 700 credit score in as little as six months is possible as long as you consistently practice good credit habits. These include making timely payments, keeping your credit utilization low, and avoiding applying for new loans or lines of credit unless you absolutely need to.
How does a beginner build credit?
To build credit fast as a beginner, you can start with a secured credit card. This card type requires a refundable security deposit and reports payments to the major credit bureaus. You can also get a credit builder loan or become an authorized user on a friend or family member’s account. You can also use rent- and utility-reporting services to have monthly bill payments factored into your credit scores.
How does an 18-year-old build credit?
It may seem difficult for an 18-year-old to build credit if they don’t have any credit history. However, building credit early is possible by becoming an authorized user on a parent or other trusted adult’s credit card. As an authorized user, you’ll receive your own card but will reap the benefits of the accountholder’s positive financial behavior.