How to Build Credit – 9 Simple Steps to Achieve Your Dreams

how to build credit

You found your dream home, and you’re excited about becoming a homeowner. Unfortunately, there’s a huge barrier you have to overcome before your name can go on the deed — your credit! Almost every milestone in life requires financial planning and a good credit rating — from purchasing a home to leasing a car to applying for life insurance. In this post, we explain how to build credit (or rebuild) with 9 simple steps.

Credit refers to your ability to borrow money and repay the debt according to the established terms – amount, interest rate, and payment date.

To determine your creditworthiness, lenders use your credit score based on the likelihood you will make payments on time. The higher the score, the better potential lenders view you and lower interest rates and favorable loan terms.

If you’re a student establishing credit for the first time, trying to rebuild your damaged credit, or looking to improve your credit score, it can be challenging to attain your goals. Lenders are reluctant to take on the risk. As the saying goes, “to get credit, you need to have credit.”

Fortunately, all is not lost. While it won’t happen overnight, you can take steps to build your credit to take advantage of all the financial opportunities having good credit brings.

credit score, how to build credit

“Credit Score Range (Basic Version)” by cafecredit is licensed under CC BY 2.0

Let’s get started.

How to build credit in 9 Simple Steps

1. Make Bill Payments On Time

Payment history comprises 35% of your credit score, making it the most significant factor. Even a payment a few days late can impact your score. Lenders need to know you pay your bills on time. Account types considered for your payment history include:

  • Credit cards
  • Retail credit accounts
  • Auto and other installment loans
  • Investment accounts
  • Mortgages

To avoid a missed payment, set up automatic bill payment through your bank or the payee. If you can’t pay the entire bill, consider paying the minimum amount, if applicable. As you discover when learning how to build credit – an unpaid account has lasting consequences.

Don’t forget the power of creating an online side hustle that can go a long way. Any small income from a side hustle will help you make those minimum bill payments, if not the full amount.

TIP: It’s never too late to start building wealth! Every additional day and year can have a compound impact on your future.

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2. Apply for a Secured Credit Card

Credit cards are a good way to establish credit but you need good credit to be approved. A secured credit card is designed for people with bad credit or limited credit history. Opening a secured credit card requires a refundable security deposit. All payments come directly from your account, meaning you will not miss a payment. Benefits of a secured credit card include:

  • Easy approval process
  • Low credit limit
  • Unable to charge more than your security deposit

After six months to a year of responsible usage, the issuer will upgrade you to a traditional credit card.

3. Become an Authorized User

When considering how to build credit, ask a friend or family member with a strong credit history to add you as an authorized user on their credit card account. Being counted as an authorized user is ideal if you have little or no credit history. You receive a credit card in your name, which adds you to credit reporting databases. You do not even need to use the card, but the account owner’s positive credit history is reflected in your credit report. However, keep in mind, your credit is impacted if the account owner makes late payments.

4. Recruit a Co-Signer

Another suggestion on how to build credit is to ask a parent, guardian or another party to co-sign your credit card or loan application. However, by acting as a co-signer, they agree to pay the debt if you do not. Any late payments can impact their credit score.

5. Be Careful About the Number of Accounts You Open

Applying for too many credit accounts at the same time hurts your credit score. Card issuers and lenders perform a hard inquiry on your credit each time you apply for an account. Too many credit requests within a short timeframe raise a red flag for potential lenders. Hard inquiries, which are essentially credit checks, can remain on your credit report for up to two years. Also, too many credit cards may tempt you to spend more than necessary while figuring out how to build credit.

6. Pay Your Balance in Full

A good habit to acquire when discovering how to build credit is to pay your balance in full each month. Carrying a balance month-to-month incurs high-interest charges, making it more difficult to pay down and more likely you will miss a payment.

Once again, don’t forget the power of saving your spare change or building your investment portfolio with the help of experts. Any small savings or growth in your investment portfolio will help you as you pay-off your balances in full every month.

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7. Finance an In-Store Purchase

Many stores offer no-interest credit purchases for an introductory period. If you make a high-priced purchase, take advantage of this financing option. The financing counts as a loan, and as long as you pay it off on time, you establish (or improve) your credit history.

8. Monitor Your Credit Reports for Errors

A credit report summarizes your credit history and contains details such as:

  • Name, address, and Social Security number
  • Credit cards, including store cards
  • Loans
  • Amount of money you owe
  • Payment history
  • Any bankruptcies

If you already have credit, you are entitled to a free credit report every year from the three major credit reporting bureaus – Equifax, Experian and TransUnion. However, due to economic uncertainty, you can request credit reports weekly. Go to to get the information.

Because lenders use your credit report to determine your creditworthiness, the information contained must be accurate. Once you know how to build credit, review your credit reports regularly for inaccuracies. If you notice any errors, take steps to correct them immediately.

When reviewing reports, some errors to look for include:

  • Wrong name and address
  • Accounts belonging to someone with the same name
  • Bills resulting from identity theft
  • Closed accounts reported as open
  • Payments wrongly reported as late
  • Incorrect account balances and credit limits.

9. Take Out a Student Loan

If you are in college or planning to continue your education, obtaining a student loan can help you learn how to build credit. Most federal student loan providers (as opposed to private lenders) do not require a credit history. In addition, federal student loans appear on your credit report and can help you establish a positive payment history (assuming you pay on time). Private lenders generally require good credit, but some will waive the credit check if you show proof of college enrollment or have a parent or guardian co-sign the loan.



Good credit is vital to your financial wellness. Many significant purchases in your life, such as a house or car, are only accessible to people with good credit. Nonexistent or bad credit makes achieving your goals difficult and expensive,

If you have no credit history, need to repair your poor credit or just want to add points to your credit score, the steps in this article will open the door to more financial opportunities. Just remember, learning how to build credit takes time, but the effort will be worth it when you have an easier time obtaining loans and credit cards.

DISCLOSURE: The post may contain affiliate links, which means that I may receive a small commission if you make a purchase using these links. As an Amazon Associate I earn from qualifying purchases. You can read our affiliate disclosure in our privacy policy. This site is not intending to provide financial advice. This is for entertainment only.

Pri Kingston

Ash & Pri are the Founders of and have spent the last decade building their way towards financial freedom and a lifetime of memories. Having successfully achieved their early retirement goal in under 10 years, they look forward to sharing their financial sense with like-minded people. Read more about Ash & Pri in the 'About Us' section.