Building credit is one of the most important financial steps a person can take. Credit can determine what car you drive, where you live and even what kind of job you get. The good news? Building credit smartly doesn’t require wealth or even years of experience. It’s all about understanding how credit works and using consistent strategies.

Understanding the Basics of Credit

Before diving into how to build credit, it's important to understand what a credit score is and how it's calculated. A credit score, typically ranging from 300 to 850, reflects how reliable a person is with borrowing and repaying money. The FICO® scoring model is one of the most common credit scores used by lenders and it weighs each of these five factors differently:

• Payment History (35%) – Whether payments are made on time
• Credit Utilization (30%) – The percentage of available credit currently being used
• Length of Credit History (15%) – How long credit accounts have been active
• Credit Mix (10%) – The variety of credit types, such as credit cards, loans, etc.
• Hard Inquiries (10%) – The number of recent applications for credit

So based on the list above, having a missed payment on your record can hurt your score more than having too many credit applications.

Smart Ways to Build Credit

1. Open a Secured Credit Card

A secured credit card is one of the most beginner-friendly tools for establishing credit. These cards require a refundable deposit—typically between $200 and $500—which becomes the card’s credit limit. Using the card for small, manageable purchases and paying the full balance on time each month establishes a positive payment history and helps boost credit.

2. Become an Authorized User

Joining a trusted family member’s or friend’s credit card as an authorized user can help jumpstart credit history. As long as the primary cardholder pays on time and maintains a low balance, the positive activity can be reflected on the authorized user’s credit report—without the need to actually use the card.

3. Use a Student Credit Card or Starter Card

Many banks offer student credit cards or starter cards designed for individuals with limited or no credit history. These cards often come with lower credit limits and simplified reward programs. Like secured cards, responsible use—keeping balances low and paying on time—is key.

4. Apply for a Credit-Builder Loan

Credit-builder loans, typically offered by credit unions and online lenders, allow borrowers to make fixed payments into a locked savings account. Once the loan is paid off, the full amount is returned to the borrower. These loans are specifically designed to help establish or repair credit by reporting payment history to the major credit bureaus.

5. Report Rent and Utility Payments

Not all your monthly expenses are listed on your credit. For example, most rent payments or cellphone payments go unlisted. You can potentially improve your credit by signing up for a utility and rent reporting service that reports your payments to the credit bureaus for you.

6. Monitor Credit Regularly

Keeping an eye on credit reports is an important step in building and maintaining a healthy credit score. Everyone is entitled to one free report annually from each of the three major bureaus—Experian, Equifax, and TransUnion—via AnnualCreditReport.com. Monitoring credit helps identify fraud, track progress, and correct any errors early.

Mistakes to Avoid When Building Credit

Building credit smartly also means avoiding common pitfalls that can slow progress or cause damage. Here are some key mistakes to watch out for:

Making Late Payments

Payment history is the most important factor in a credit score. Even one missed payment can lower a score significantly and remain on the report for up to seven years. Setting up automatic payments or reminders can prevent this issue entirely.

Maxing Out Credit Cards

High credit card balances increase the credit utilization ratio, which negatively impacts scores. It’s recommended to keep balances under 30% of the total credit limit.

Applying for Too Much Credit at Once

It’s untrue that a rejection hurts your credit score. But if you’re rejected and then try to apply to multiple other lenders in a short time frame, that can hurt your credit. Each new application results in a hard inquiry, which can temporarily reduce a credit score. Applying for multiple credit products in a short period may also seem desperate to lenders. It’s best to be strategic and selective with credit applications.

Closing Old Credit Accounts

While it might seem responsible to close a credit card that’s no longer in use (or maybe you’re using too much), doing so can actually shorten the average length of credit history and reduce available credit—both of which can hurt a score. Unless there are fees involved, it’s often better to keep older accounts open.

Ignoring Credit Altogether

Avoiding credit completely may seem safe, but it prevents building any credit history at all. Responsible credit use—not zero credit use—is the key to long-term financial flexibility. You can have a low credit score by doing nothing. It takes consistent and responsible activity to build up to a great credit score.

Building credit the smart way takes a mix of patience, responsibility, and awareness. By starting with the right tools—like secured cards, authorized user status, or credit-builder loans—and avoiding common pitfalls, anyone can create a strong financial foundation. The key is consistency: pay bills on time, keep balances low, and monitor progress regularly. With these habits in place, a strong credit score is well within reach.

FAQ

How long does it take to build good credit?

Because everyone’s credit profile is different, there is no direct way to answer this question. If you have a history of missed payments, charge-offs, debts in collections, etc. you may not see a good credit score for a long time. If you’ve just started to build credit, you may be able to reach a good credit score within 6 to 12 months of opening a credit account as long as you’re responsible.

Can you build credit without a credit card?

Yes. Credit-builder loans, student loans, and even reported rent or utility payments can all help build credit without a traditional credit card.

Does checking your credit score lower it?

Not at all. Checking your own credit score is a soft inquiry and does not affect your score. Only hard inquiries from lenders do. Check your own credit score as often as you want.

What is a good credit utilization ratio?

A credit utilization rate under 30% is generally considered best.

Should a secured credit card be closed after building credit?

Not necessarily. Many lenders offer the option to upgrade a secured card to an unsecured one. If there’s no annual fee, it may be beneficial to keep the account open to maintain credit length and available credit.