How to Build Credit

Buying a house, getting a new car or landing that job you’ve always wanted are all exciting times. However, if you don’t have a good credit score, you may find yourself on the outside looking in. What comes as a surprise to many people is that the best way to build credit requires active work on your part. Just because you think you’re trustworthy doesn’t automatically mean that lenders will take your word for it. Building your credit score is not hard, but it does take time and a little intentional effort.

Why is it important to have good credit?

Your credit is key to your financial freedom and flexibility. Before any lender gives you money to make a major purchase, the company checks your credit scores and reports to ensure you’re a low-risk borrower. If you don’t have good to great credit, you may be denied the loan, or you may be approved with much less favorable rates and repayment terms.

That’s not all, though. If you’re a business owner, you may need capital to start or grow your business. Lenders generally will look at your credit score as well to make that approval. Building business credit will help you secure better rates on working capital loans, inventory loans and more.

Read More: How to Build Business Credit

Some employers will also check your credit when determining if you’re a good fit for a position. Generally, higher-profile jobs wherein you have access to large amounts of money fit this bill, like fund managers or corporate accounting. If you don’t seem like someone with a good or proven track record of the ability to steward money, you might not get the job.

How to build your credit

Credit is not something you start with that is yours to lose. Building good credit starts from the ground up.

How long does it take to build good credit? It depends on a lot of different factors. However, you can start to see some fairly immediate results within a few weeks or months. Building great credit may take you over a year, but you can get some good traction early in the process.

Here are some steps for the best way to build your credit no matter what stage in the process you are.

  1. Check your credit report for inaccuracies. Make sure there are no errors or discrepancies on your current credit report. There’s no need to start building your credit from a position of disadvantage, especially if it’s a mistake.
  2. Get a credit card. Credit cards are a great way for you to start building credit. By using your card for purchases and then making on-time payments, you start to showcase a track record of the ability to make good on your financial obligations, which is the basis of good credit.
  3. Become an authorized user on a credit card. One of the bigger pieces of your credit score is the amount of credit you currently have access to and how much of it you are using. The lower the percentage you are using, the higher your credit score.
  4. If you link yourself as an authorized user on someone else’s credit card that they rarely carry a balance on, it can increase your score. Bear in mind that this person will need to trust you as you would have access to the account. Additionally, only link yourself to an account with a lot of unused credit on it, or you will not get the benefit you’re looking for.
  5. Take out a small personal loan. Personal loans are available for smaller amounts and can be made available to new borrowers with less-than-great credit or no credit. The money may be more expensive, but it is a good way for you to begin building out your credit history. Just make sure that you have a plan to make on-time payments and live up to your financial responsibility before taking out the loan.

How to maintain good credit

Once you’ve built up good credit, you must take the necessary steps to maintain your hard work. There are three main things you should do to maintain your good credit. First, regularly check your credit report. Inaccuracies happen often, and you could be penalized for something you didn’t do. In fact, a study by the Federal Trade Commission (FTC) showed that 1 in 4 consumers identified an error on their credit report.

Second, continue to make on-time payments and live up to your financial obligations. A single late payment can have a devastating effect on your credit for years, so avoid setting yourself back.

Lastly, be careful with hard credit inquiries. Every time you request lending and your credit score is pulled, it can hurt your overall score. How long do these stay on your report? It can stay on your report for up to 24 months.

What to look out for in your credit report

As mentioned, periodically checking your credit report is critical to building and maintaining a good score. Each of the three major credit bureaus will provide you a free copy of your report, which you can get from

What should you be looking for? According to the FTC, the most common errors are in personal information, the reporting of account status, balance errors and data management errors. If you do find an error, dispute it immediately with the incorrect credit bureau. The FTC study showed that 4 out of 5 people who disputed something on their credit report saw some form of modification.

What is alternative credit?

Your FICO credit score is the current gold standard for over 90% of lenders. However, this score has been criticized for leaving out critical data that may help to paint a clearer picture. Alternative credit aims to remedy this. Instead of just looking at your major lending decisions, it looks at things like your rental payments, utility payments, alternative financial service data and more.

By using alternative credit scores, you may have a better chance of getting that car loan you’re looking for or securing a mortgage. Many of the major credit bureaus offer programs that will link your banking information to your score to get a better picture of your creditworthiness. Examples include UltraFico and Experian Boost.

The bottom line

The key to how to build good credit is starting as early as possible and sticking to your plan. Building your credit score doesn’t require grandiose financial moves; it only requires doing the right thing, living up to your financial obligations and continuing to make on-time payments.

We welcome your feedback on this article and would love to hear about your experience with the non-owner car insurers we recommend. Contact us at with comments or questions.

Keep reading 

Jason Lee

Contributing Writer

Jason Lee is a U.S.-based freelance writer with a passion for writing about dating, banking, tech, personal growth, food and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill sets with the rest of the world. Follow Jason on Facebook here