The Simple Guide to Building Credit in 2021

If you have a short credit history or a poor credit score, you may be wondering how to build good credit. A good credit score can unlock all kinds of financial perks and benefits, from rewards credit cards to low-interest rates on personal loans, mortgages and more. Having good credit can also help you when applying for apartments and job applications, as prospective landlords and employers will sometimes check up on your score to make sure that you’re financially responsible.

In 2019, the average credit score was 703. Credit scores range from 300 to 850, with a good score often considered to be 670 and above. While having a good credit score is important for your overall financial health, building credit can be confusing and even intimidating to people who are unfamiliar with it. Once you damage your credit score, it can take time and persistence to build up your score again. Luckily, there are a few simple steps you can take to raise your score over time.

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    How to build your credit

    If you’re looking to boost your credit score, you can pursue a variety of strategies. These include:

    • Making payments on time every month – Missed or late payments are among the biggest factors that negatively affect your credit score. Making sure to pay monthly minimums on credit cards and loans can help keep your score high.
    • Keep your credit utilization low – Credit utilization is the percentage of your revolving credit you’re currently using. You should try to keep your credit utilization below 30% if possible. For instance, if you have a credit card with a limit of $1,000, you should try not to have more than a $300 balance on the card at any given time.
    • Review your credit report and dispute any errors – It’s always a good idea to review your credit report and dispute any mistakes, especially if you have a common name or a name similar to that of a relative. Removing negative errors from your credit report can result in a significant boost to your score.
    • Keep open old accounts – Account age also influences your credit score, with older accounts being weighed more favorably than new ones. Even if you no longer use a particular credit card, you should consider keeping it open to bump up your account’s average age.
    • Avoid hard pulls – Hard inquiries can temporarily damage your credit score. To avoid this, try to prequalify for loans, cards, and other financial products whenever possible so that you don’t incur any more hard pulls than you have to.
    • Be patient – Building good credit takes time, and a good credit score doesn’t happen overnight. One of the most important factors in building up good credit is to be patient and wait for things to gradually improve. Over time, you’ll build up good history as a reputable borrower, and any negative marks will fall off your credit report after several years have passed.

    How long does it take to build credit from scratch

    According to Experian, building up credit from scratch typically takes about three to six months. This is how long it takes for new loans, credit cards and debts to show up on your report. If you’re building credit from scratch, you might want to consider opening up a secured credit card, where you put down a cash deposit for a certain amount in exchange for opening a card. You can also ask to become an authorized user on another person’s account. If they pay their bill on time each month and have good credit, you can benefit from their behavior while building your score.

    [Read: A 12-Month Plan to Raise Your Credit Store in 2019

    UltraFICO vs. Experian Boost: Two new ways to build credit

    Experian Boost and UltraFico are new ways that consumers can boost their credit score, while also monitoring their report for new developments and changes. Experian Boost allows consumers to report phone and utility bill payments, which can help them raise their credit score by providing a history of on-time payments. You can also access a free Experian credit report, and FICO score through Experian Boost, as well as set up credit monitoring and alerts.

    UltraFICO is a similar program that allows consumers to link their checking, savings and money market accounts to your FICO score. A history of having cash on hand or a savings safety net can boost your credit score by indicating healthy financial behavior and a history of saving. Plus, you may be eligible for an UltraFICO score even if you don’t have enough credit history for a regular FICO score.

    Can alternative credit scoring help you get a mortgage?

    Alternative credit includes payments for things like rent, utility bills, childcare and insurance payments. While these payments often don’t show up on a traditional credit score, they are an important indicator of financial stability and low risk for lenders. Alternative credit scoring can help people with no credit scores demonstrate their financial health to prospective lenders. This can help consumers to secure loans and mortgages that require a good credit score.

    How to build business credit

    Like personal credit, building business credit takes time. Most steps to building good business credit are similar to the ones used to build personal credit, while others are specific to businesses. Steps include:

    • Checking your credit score to see where you stand
    • Opening a business bank account
    • Incorporating your business or forming an LLC
    • Opening a business credit card
    • Making payments on time

    Hard inquiries and soft pulls on your credit report: What’s the difference?

    Hard pulls and soft pulls affect your credit score differently. Hard pulls negatively affect your credit, and are used by lenders to determine whether you’re a good candidate for a loan or other product, and typically stay on your credit report for two years. Hard inquiries are usually done when you apply for a credit card, whether it be a cash-back card or a rewards card. When applying for a mortgage, or a loan, you’ll also notice a hard inquiry on your credit report.

    Because of the nature of wanting to shop for the best loan terms, if you’re looking for a house, for example,  the hard inquiries will only count as one, typically in a certain window of time.

    Still, you want to avoid having too many hard pulls on your report at once, as this can be a sign of financial instability for lenders. Soft pulls, on the other hand, don’t damage your score. A soft pull typically occurs when you apply for a loan or credit card and can prequalify. Lenders that allow borrowers to prequalify, employers and insurance companies may all conduct soft pulls of your credit.

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    Margaret Wack

    Contributing Writer

    Margaret Wack writes about personal finance, health, wellness, arts and culture, among other topics.

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to,, and elsewhere.