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Key takeaways
- Building credit from scratch may take at least six months to generate a credit score with responsible credit use.
- Secured credit cards, credit builder loans, and becoming an authorized user are the easiest ways to start when you have no credit history.
- Payment history makes up 35% of a FICO Score and is the largest single scoring factor.
A strong credit score can make your financial life easier. You can usually get the best loan offers with low interest rates when you have a high credit score.
But what if you’re just starting your credit journey? Below, we’ll cover what credit is, how long it takes to build, and proven strategies for building or boosting your credit score.
What is credit, and why do you need it?
Credit is your track record of borrowing and repaying money. Lenders use your credit history to decide whether to approve you for loans, credit cards, apartments, and more.
Credit bureaus compile your borrowing history into a credit report, which they use to calculate your score. This three-digit number typically ranges from 300 to 850 and is split into the following ratings to help lenders determine your creditworthiness:
| Credit score range | FICO® rating |
|---|---|
| 300–580 | Poor |
| 580–669 | Fair |
| 670–739 | Good |
| 740–799 | Very good |
| 800–850 | Exceptional |
You’ll need credit for many major life steps. Landlords check it before approving rental applications, lenders review it for car and home loans, and some employers even look at it during the hiring process. Building good credit early can help you unlock better loan offers and lower interest rates.
How long does it take to establish credit?
Building credit doesn’t happen overnight. Expect to put in about six months of consistent, responsible credit use before establishing a score with major credit bureaus.
Scoring models like FICO® or VantageScore need enough data – such as on-time payments and account activity – to generate a rating. You might start seeing improvements in as little as 30 to 45 days, but building a solid score takes ongoing effort.
The exact time frame varies depending on how often lenders report your activity and the types of credit you’re using.
Ways to start building credit
If you want to build credit efficiently, you need to take the right steps. Here are seven proven ways to establish credit when you’re starting out.
1. Open a credit card to build credit
Signing up for a new credit card is an excellent way to start building credit. Without an existing credit history, you might have limited options, so you should start with the best credit cards to build credit.
Creating a credit history with a card can jumpstart your journey toward becoming a stronger candidate for future lines of credit. Some options to consider include:
Secured credit card
A secured card is designed for borrowers with a poor or nonexistent payment record. You’ll typically need to make a small security deposit as collateral, which acts as your credit limit. Then, use the card for everyday purchases and pay it off promptly to start building positive credit.
After several months of responsible use, you might be eligible for an unsecured credit card, which can help you continue building your credit responsibly.
Student credit card
If you’re a student, one of the smartest credit-building strategies is to apply for a student credit card. These cards can help you build credit if you have minimal credit history or you’re starting from scratch. You can use it like a regular credit card, but it often comes with lower credit limits.
After you get your first card, use it for small, everyday purchases you can comfortably pay off. Paying your balance in full each month creates a solid history of on-time payments – a crucial step in showing lenders you can borrow money responsibly.
2. Build credit by becoming an authorized user
Becoming an authorized user on a credit card is another way to start building credit. With this method, a trusted family member or friend adds you as a user to their card. Their responsible usage then reflects on your credit report.
The main benefits of this approach are:
- Faster results: You can build credit without applying for your own card, which can temporarily lower your score.
- No credit check needed: The primary cardholder’s good payment history and low credit utilization can boost your score.
Just remember to be respectful. You’ll get your own card, but the primary account holder is responsible for all payments. Ask before making purchases and pay them back right away.
Get a loan to establish credit
Taking out a loan can also help you start building credit. If you’re just starting out, an installment loan – like an auto loan, mortgage, personal loan, or student loan – can help you build your score over time.
There are several different options to choose from when you don’t have an established credit history to prove your trustworthiness to lenders:
- A secured personal loan requires you to put up an asset, like a car or boat, as collateral. Making on-time payments builds credit, but the lender can repossess your collateral if you can’t repay.
- With a credit builder loan, you make monthly payments plus interest, and the lender deposits the money into a savings or CD account. You get access to the funds after finishing all payments, and your payment history gets reported to credit bureaus.
Just make sure the lender reports to three credit bureaus: Experian, TransUnion, and Equifax.
4. Pay your bills and loans on time
Payment history accounts for 35% of your FICO credit score. That means on-time payments have a greater positive impact on your credit score than any other factor. But, on the flip side, making late payments or defaulting on your debt altogether can quickly tank your credit score.
You can’t dispute late payments on your credit report unless the information is inaccurate. The Federal Trade Commission (FTC) provides guidance on disputing errors in credit reports.
Here’s how to avoid late payments going forward:
- Set up autopay: Make sure your checking account has enough funds to cover automatic payments and avoid overdraft fees.
- Use a calendar: Add payment due dates for your rent, mortgage, car loan, student loans, and personal loans so you never miss one.
- Consolidate debt: If you’re juggling multiple credit card payments, consider a debt consolidation loan or a balance transfer card to simplify your payments.
5. Reduce your credit utilization
Credit utilization is the percentage of your available borrowing limit that you’re using. It accounts for 30% of your score, making it the second-most important factor after payment history.
Here are three ways to maintain a low credit utilization rate:
- Pay down balances: Reduce existing balances without taking on new debt.
- Use credit sparingly: Only charge a few monthly purchases and pay them off in full that same month.
- Request a credit increase: After a few months of responsible use, ask for a higher credit limit. This lowers your utilization ratio if your spending stays the same.
6. Treat your credit card like a debit card
A credit card allows you to spend up to your credit limit even if you don’t have the cash on hand. This can lead to carried balances, high-interest debt, and higher credit utilization – all of which can hurt your score.
To establish good credit, treat your credit card like a debit card. Only use it for purchases you can afford and pay it off in full each month.
7. Build credit with everyday bills
You’re likely paying regular monthly bills, such as your phone bill, rent, or utilities. Unfortunately, these payments are typically not reported to credit bureaus.
Some financial tools, like Experian Boost®, can report your on-time bill payments to the major credit bureaus. Consistent reporting can build your credit and payment history while increasing the diversity of your credit report.
Building credit is a marathon, not a sprint
Establishing credit takes time and consistent effort, but you don’t have to figure it out alone. The strategies we’ve covered – from secured credit cards to becoming an authorized user – can help you build a solid credit foundation. In time, you’ll have your credit score in a healthier spot, making it easier to qualify for apartments, car loans, and other major life goals.
Ready to start your credit journey? Here’s everything you need to know about how credit reporting works with Chime.
Frequently asked questions about how to establish credit
How long does it take to establish credit?
It typically takes about six months of consistent, on-time payments before you can establish a credit score with the major credit bureaus. You might see some early progress in 30 to 45 days.
Can you establish credit with a debit card?
No, debit cards don’t build credit because they withdraw funds directly from your checking account, with no borrowing involved. To build credit, you’ll need a credit product like a secured credit card, credit builder loan, or authorized user status.
Does paying rent build credit?
Paying rent doesn’t automatically build credit because most landlords don’t report to credit bureaus. However, you can use rent reporting services that send your payment history to credit bureaus, helping you build credit from payments you’re already making.
What should I do if I get rejected for a credit card?
Don’t panic – consider a secured credit card, which requires a security deposit but is easier to qualify for. You can also ask a trusted family member to add you as an authorized user on their card.
How do I check my credit score and track my progress?
You can check your credit score through many financial institutions or free credit monitoring services. You are entitled to a free weekly credit report from each of the three nationwide credit bureaus via AnnualCreditReport.com. Checking your own credit won’t hurt your score.