How To Build Credit: 10 Easy Strategies

Credible takeaways

Some credit-building strategies can improve your score within a month, while others can take months or years.
Becoming an authorized user, asking for a credit limit increase, and fixing mistakes on your credit reports can be quick ways to improve your score.
Making timely debt payments, getting a secured loan, and using a credit-builder loan are longer-term approaches to establishing good credit.

Your credit score determines your ability to rent an apartment, borrow money, and buy a house. Additionally, a good credit score can make all of these much more affordable, resulting in thousands of dollars saved or spent on other goals.

Unfortunately, knowing how to build credit isn’t always straightforward. If you don’t have credit — or if your credit’s bad — it can be difficult to change course. But that doesn’t mean it’s impossible. While a few strategies can improve your credit almost overnight, others require months of dedication. Through both quick gains and long-term improvement, the following methods can get your score moving in the right direction.

1. Pay off or consolidate debt

If you’ve built up debt that’s dragging you down, you may be eligible to consolidate your debt or refinance it at a lower rate. Debt consolidation is when you pay off existing debt — like high-interest credit card debt — with a new loan, ideally with a lower interest rate. If you can qualify, debt consolidation can have a number of positive (and quick) impacts on your credit score.

First, paying off credit card debt decreases your credit utilization and increases your available credit (as long as you keep your cards open). Credit utilization can contribute up to 30% to your FICO score, and is reported to the bureaus at least monthly, which can result in a quick win, credit-wise.

Second, consolidating debt reduces your number of monthly payments, making it easier to stay on top of them, which is crucial for building credit. Out of all the factors affecting your credit score, payment history has the biggest impact, making up 35% of your FICO score. Repaying debt on time shows creditors you’re a responsible borrower.

Tip

Lower monthly payments can lower your debt-to-income ratio (DTI) — your debt payments divided by your gross monthly income. Lenders use this metric to gauge whether you’re able to afford another monthly payment.

2. Get a secured credit card

If you have low or no credit, getting approved for a regular (unsecured) credit card may be a challenge. But you can probably get a secured credit card, which is a tool commonly used to help build credit.

When you apply for a secured credit card, you make a deposit to secure your credit line, similar to securing a loan with collateral. For example, a lender might require a deposit anywhere between $200 to $5,000, though this will vary depending on the issuer.

You can then use your card like a regular credit card, up to your approved credit limit (typically the value of your deposit). Making on-time payments every month helps establish and improve your credit. You can often upgrade to a regular credit card after a period of consistent on-time payments.

3. Ask for a credit limit increase

Your credit limit is the amount of money you're allowed to borrow with a credit card or line of credit. If you’re constantly hitting that limit — or “maxing out” your cards — lenders may get the impression that you’ve overextended yourself. In other words, the lack of wiggle room in your accounts can be a red flag that you’re struggling financially, which can hurt your score.

The opposite is also true: Using less of your available credit may help boost your score. One way to use less of your available credit, regardless of your balance, is to get a credit limit increase. Call your credit card companies and request a credit limit increase, or submit a request through each credit card company’s website.

4. Become an authorized user

An authorized user is given permission to use someone else’s credit card without being legally responsible for the payments. A parent, for example, might make their child an authorized user on their account. The benefit is that the account is generally reported on the authorized user’s credit report, which can help significantly if you’re trying to build or rebuild credit.

First, any payments made on the card are recorded on your credit report, along with the card’s limit and available credit. If the card owner makes on-time payments, it can help you establish a positive payment history, which makes up 35% of your FICO score. If the card owner keeps the balance low, it can increase the credit available to you, and thereby lower your credit utilization.

For example, a college student who has no credit accounts of their own can start building credit by becoming an authorized user on a parent’s card. Or a spouse could become an authorized user on their partner’s account to work toward improving a spotty credit history.

But while you can benefit from being an authorized user, you can also experience drawbacks. If the account holder defaults on their payments, or reaches their credit limit, this can negatively affect you as well.

5. Get a secured loan

If you can qualify for a loan, making regular on-time payments can help you build your credit. But qualifying for an unsecured loan like a personal loan can be tough without great credit.

Secured loans are easier to get. These loans require collateral — an asset, like your house or car — to secure the loan. Because your collateral is on the line, you may be less likely to default on a secured loan, and the lender can recoup some of its losses if you do. This usually makes lenders more willing to work with you.

If you go this route, it’s especially important to keep up with monthly payments. Falling behind can not only hurt your credit, it can also lead to the loss of your collateral.

Learn More: Secured vs. Unsecured Personal Loans

6. Get a credit-builder loan

Credit-builder loans are like installment loans that work backward. Instead of borrowing a lump sum upfront and repaying it over time, you make the payments on your credit-builder loan before you get access to the money. You can think of it as gradually building your savings (for a cost) while also building credit at the same time.

Important

Like regular loans, credit-builder loans generally charge interest, even though you won’t get the money until you’ve finished making payments.

Credit-builder loans are available up to $3,000, and terms often range from six to 24 months. Generally, you can find credit-builder loans at smaller banks, credit unions, and online lenders.

Check Out:

7. Use a cosigner

It can be tough to establish a credit history without qualifying for some type of credit, but it’s also hard to qualify for credit without a credit history. However, getting a loan with a cosigner can help.

A cosigner is someone with good credit who signs the loan with you, essentially giving the lender their word that they’ll pay if you can’t. Having a cosigner can make lenders more comfortable approving your application. So even if you can’t qualify on your own, you may be able to with a cosigner. Just make sure your cosigner understands the risks before signing. If you fail to make payments, it can hurt their credit as well as yours.

Learn More: Co-applicant vs. Cosigner

8. Report utilities and bills to credit bureaus

Rent and utility payments can help you build credit if they’re reported to credit agencies and if you make on-time payments. Rent-reporting services, like Self or Boom, report rent and utility payments to some or all of the major credit bureaus for you. Some services charge a subscription fee, others may not.

9. Practice good credit habits

In addition to specific actions and strategies, several simple habits can help you build good credit. This includes making on-time payments on outstanding debt, only applying for credit when needed, and keeping old credit cards open.

It's also worth noting not to finance purchases outside of your means. If you need a new car, for example, or are buying a home, don't be tempted to max out the purchase price based on what you can qualify for. Always choose a loan amount that you're confident you can comfortably afford, and will be able to comfortably afford for the duration of the loan's term.

10. Check your credit reports

In a perfect world, your credit reports would always be completely accurate. But mistakes happen, and they can cost you. For example, a fraudulent account under your name could hurt your credit score if you don’t become aware of it. Make it a habit to check your credit reports for errors regularly — the Consumer Financial Protection Bureau suggests doing so at least once per year.

You can get free weekly copies of your credit reports at AnnualCreditReport.com. If you find an error on a credit report, dispute it. Send a letter to the credit reporting agency and the company that provided the mistaken information, or file a dispute online. Fixing an error can potentially improve your credit.

FAQ

Why is credit important?

Open

Credit is important because lenders, landlords, and even employers may use it to determine whether or not they want to work with you. If you have good credit, lenders tend to be more willing to loan you money.

The opposite is true also. If you have poor credit, you may find it more difficult — and expensive — to buy a house, rent an apartment, or take out a loan.

How can I build credit fast?

Open

You can become an authorized user, ask for a credit limit increase, and dispute errors on your credit report — each can have a positive impact on your credit.

But knowing how to build credit and putting these strategies into place won’t necessarily get you there overnight, especially because the length of your credit history has a big effect on your credit score.

What is a good credit score?

Open

Generally, a good credit score is a FICO score above 670 . Credit scores range from 300 to 850, and the higher the score, the better.

Higher scores tend to make it easier to qualify for loans and lines of credit, but lenders take other factors into account — like income and DTI — when deciding whether or not to approve a borrower’s application.

How long does it take to build good credit?

Open

It depends. If you’re starting from scratch, it can take six months or more to establish credit. Building good or excellent credit can take even longer.

Plus, derogatory marks — like late payments, foreclosures, or other negative indicators — can stay on your report for up to seven years. But positive action to improve your credit can help mitigate their impact.

Read More:

Meet the expert:

Emily Batdorf

Emily Batdorf is a personal finance expert, specializing in banking, lending, credit cards, and budgeting. Her work has been featured by USA TODAY Blueprint, New York Post, MSN, and Forbes Advisor.