Tips For Establishing Credit And Building Up Your Score Over Time

Having good credit is crucial for getting approved for loans and credit cards with favorable interest rates. You need credit history for lenders to assess your creditworthiness. If you’re just starting out, here are some tips for establishing credit and building up your score over time:

Get a Secured Credit Card

Secured cards require a cash deposit that acts as your credit limit. The deposit shows you can pay, helping build initial credit. Use the card sparingly and make all payments on time. After about a year you can upgrade to an unsecured card and get your deposit back.

Become an Authorized User 

You can piggyback off someone else’s good credit if they add you as an authorized user on their credit card. Their payment history will appear on your credit report and factor into your score. But you aren’t liable for the debt. Ask a parent or family member with a long positive history.

Apply for Student or Beginner Credit Card

Look for “student” or “starter” credit cards aimed at those with little or no credit history. Terms are designed for new borrowers and tend to have lower credit limits but don’t require a security deposit. Use responsibly.

Use a Credit-Builder Loan 

Credit-builder loans allow you to make payments into a savings account for 6-24 months. The bank then releases the money to you as a lump sum. Monthly on-time payments are reported to help establish positive history.

Avoid Department Store Cards

While tempting for discounts, retail store cards have high interest rates and low limits. Occasional use won’t build substantial history. Opt for better beginner cards. Juggling multiple new cards can overwhelm new borrowers.

Pay Bills on Time 

On-time rent, utility, phone and other payments aren’t reported to credit bureaus but late payments are. Avoid negative marks by staying on top of bills. Set up autopay or reminders to stay organized. 

Check Credit Reports 

Order free annual credit reports and check for errors or suspicious activity. Dispute any inaccuracies with credit bureaus. Monitoring reports ensures your history is accurate.

Building credit takes diligence and responsible habits over time. Start small with a secured card or authorized user status, use new credit minimally, pay on time always, and monitor your reports. With consistent good behavior, your score will steadily improve.