Key takeaways:
Building your credit score can improve your chances of qualifying for loans and credit cards.
Paying bills on time and maintaining a low credit utilization rate can help boost your credit score.
Consider using a secured credit card or a credit builder loan to help build or rebuild credit over time.
Your credit score is vital to your financial life. This three-digit number tells lenders how likely you are to repay your debts, and it can influence whether you're approved for credit cards, loans, mortgages, apartments, and more.
That's why you should work to maintain a healthy credit score. But what if your credit is damaged? Luckily, improving your credit score is possible. This guide explains how to build your credit score and work toward a brighter financial future.
How to build your credit score
You can build your credit score by:
Reviewing your credit reports for errors
Disputing inaccuracies
Paying bills on time
Lowering your credit utilization ratio
These core actions address the factors that have the biggest impact on your score. Building positive credit history with tools like a secured credit card or credit builder loan can also help you raise your credit score over time.
The key to improving your credit score is consistency. Focus on the habits that matter most, such as on-time payments and keeping balances low, and your score can gradually climb. 10 steps to building your credit score
Ready to start your journey toward a more positive credit score? Follow these 10 steps to build your credit.
1. Check your credit reports for errors
The first step in building your credit is to obtain a copy of your credit report from each of the three major credit bureaus: Equifax®, Experian®, and TransUnion®. You can check your credit report for free at all three bureaus once a week through AnnualCreditReport.com.
Next, carefully review your credit reports to identify any discrepancies or inaccuracies. Check to make sure the following information is accurate:
Personal information like your name, birth year, address, phone number, employers, and personal statement
Accounts, including credit cards, credit lines, and loans
Collections
Public records, like bankruptcies
If everything looks correct, you can skip the next step. However, if you find any errors, address them as soon as possible.
2. Dispute inaccuracies on your credit report
Credit report errors can be difficult to correct, and inaccurate information remains one of the most common reasons consumers file complaints with the Consumer Financial Protection Bureau (CFPB). If you spot an error on your credit report, contact the credit bureau that reported it and begin the dispute process as soon as possible. You may also dispute the information directly with the company that furnished it to the credit bureau(s).
File a dispute with each credit bureau that lists the error on its report. Include a letter that details the error, copies of documents that support the removal request, and a copy of your credit report with the inaccurate information circled or underlined. Credit bureaus have 30 to 45 days to investigate after you file your dispute.
Once you've resolved the errors, monitor your credit report closely to ensure nothing else negative is added.
3. Pay your bills on time
Payment history accounts for 35% of your total FICO® Score — the largest of the five FICO scoring factors. Lenders may also use other scoring models, such as VantageScore®, which weigh factors differently.
Setting up autopay on your credit accounts — like credit cards and loans — can help you avoid late payments, which can affect your credit score.
Plan to pay off your credit card balance each month if possible. At a minimum, make the required payment by the due date. Late payments can negatively affect your credit history and credit scores, particularly if the delinquency is reported to the credit bureaus.
4. Lower your credit utilization ratio
Your credit utilization ratio is the amount of your available credit you're using. Amounts owed account for 30% of your FICO® Score, making it the second most influential factor on your credit score.
If you have a total credit limit of $10,000 and use $5,000, your credit utilization rate is 50%. In general, lower utilization is better. Some experts recommend keeping utilization at or below 30%, but there is no single utilization percentage that guarantees a particular score.
5. Pay down existing debt
Holding a lot of debt makes it riskier for lenders to approve a credit card or loan application. Repaying outstanding debt not only makes you look better to lenders, but it also reduces your overall credit utilization ratio.
Even paying a portion of your debt can lower your utilization. Make a budget that helps you to free up money for repayments. Prioritize paying down balances, especially on any maxed-out credit cards.
Focus on paying off debts with higher interest rates first.
6. Keep old credit accounts open
The length of your credit history accounts for 15% of your FICO® Score. Generally, the longer your credit history, the better your score can be.
Your credit history length is determined by the ages of your oldest and newest accounts, as well as the average age of all accounts combined. Even if you have old credit cards you no longer use, keeping them open can help preserve your total available credit, which may support a lower credit utilization ratio. Closing an account doesn't necessarily reduce your average account age right away — FICO may continue to consider closed accounts in length-of-credit-history calculations while they remain on your credit report.
7. Build positive credit history
Products designed to build credit — like secured credit cards and credit builder loans — are reported to the credit bureaus. When used responsibly with on-time payments, they can help you establish a positive credit history.
Apply for a secured credit card
Responsible use of a secured credit card, like the Chime Card®, can help improve your credit history.1
Reporting practices vary by issuer, so confirm whether your secured card reports payment activity to the credit bureaus. When activity is reported, on-time payments can help you build a positive credit history — and late payments can negatively affect it.
Learn more about secured credit cards to see whether they could be a helpful tool for strengthening your credit.
Consider a credit builder loan
A credit builder loan is a short-term loan designed to help you establish or rebuild credit. This type of loan works differently from a traditional loan. It's a common way to build credit without a credit card.
Credit builder loans put a small amount of cash in a savings account while you make monthly payments. Once the loan term ends, you receive the balance. Depending on the lender, the account may earn interest. Provided you've made on-time loan payments and the lender reports the account and your payment to the credit bureaus; you may see an improvement in your credit score. You should confirm your lender's reporting practices before applying.
Become an authorized user
If you can't qualify for new credit right now, you could ask a friend or family member with good credit to add you as an authorized user on their credit card. Not all issuers report authorized users, and scoring treatment varies by bureau and model. When the account is reported, the primary cardholder's activity affects your credit file — on-time payments and low balances may help, while late payments or high balances could work against you.
Check that their card issuer reports authorized user activity to all three credit bureaus. To keep your friend or family member's credit in good standing – and maintain their trust – avoid using their credit card unless you can pay on time.
The original cardholder remains liable for any charges incurred by the authorized user, so misuse of the card can lead to fractured relationships.
8. Limit new credit applications
Sometimes, applying for credit is necessary. An application may result in a hard inquiry, which can affect your score. The impact varies, and not every credit application uses a hard inquiry. Opening a new account can also affect the average age of your credit history, and multiple recent applications can affect scoring and lender underwriting.
When building your credit score, be strategic about when and why you apply for credit. Only apply for new credit accounts when you genuinely need them, since too many new applications can negatively impact your score.
9. Monitor your credit and stay alert
Take advantage of free credit monitoring tools and fraud alerts. Set up credit freezes if you suspect suspicious activity or identity theft attempts.
Watch for unexpected account openings, sudden credit score drops, or new debt collections. If you spot any red flags, file a report with the FTC at IdentityTheft.gov.
At a cadence that works for you – monthly or quarterly are good starting points – continue to verify reporting accuracy for active accounts and dispute any inaccuracies you identify.
10. Keep expectations in check
Each bureau updates data at different times, uses slightly varied scoring models, and may not receive identical account information. As a result, your scores can move independently — focus on overall trends, not identical numbers.
There is no universal timetable for improving a credit score. Changes depend on when information is reported, your overall credit profile, and the scoring model used.
What affects how quickly you see changes:
When your creditors report — reporting cycles vary and may not align with your payment due dates
Dispute timelines — disputes can take up to 45 days in some circumstances
Your overall credit profile and the scoring model used
Build your credit today
Building your credit takes time and consistency. Following credit-building practices like the ones in this guide can improve your credit over time, which may help you qualify for benefits like lower interest rates and more borrowing options. Results vary based on your individual credit profile.
Looking for a secured card designed to help build credit? Learn how to use the Chime Card.