Credit has a wide-reaching impact on many different aspects of everyday life. It can determine whether you receive a loan, how much interest you’ll owe or even if you’re approved to rent an apartment. If you don’t have a credit history, then lenders don’t have a track record of how you’ve handled debt in the past, and might be more hesitant to lend to you. Or, if you’ve had issues with late payments or credit cards, then your record may have negative entries that hold you back from moving forward. Both of these situations can be discouraging scenarios.
The good news? Your current credit picture isn’t forever — it’s always changing. A poor credit record today doesn’t mean you’ll be penalized forever, and starting from scratch simply means that it might take longer for you to receive credit. By adopting simple, consistent habits and utilizing sound financial strategies, you can start building a credit history that works for you. Ultimately, demonstrating your creditworthiness will help you to become qualified for bigger financial opportunities and become more confident in dealing with money.
Credit history vs. credit score: What’s the difference?
Before diving into the specifics about establishing credit, it is useful to know the distinction between your credit history and credit score.
Your credit history is a record of how you borrowed and paid back money over time. It contains details from your credit reports, like whether you made payments on time, how much you owe and for how long you’ve had accounts open. These reports are kept at credit reporting agencies like Equifax, Experian and TransUnion, as well as smaller specialized agencies.
Your credit score is a three-digit number that summarizes your credit history in a snapshot. Most scores are between 300 and 850, and higher scores indicate that you are more likely to repay borrowed money. While it’s common to focus on the number, remember that the number only exists because of the history behind it. When you work on building credit history, you’re also creating the foundation for a stronger score.
How to Build Credit History
Get a secured credit card.
A secured credit card is one of the simplest ways to start establishing credit if you are starting from scratch, recovering from bad credit, or are denied a regular credit card. Unlike a regular credit card, a secured credit card requires you to put a deposit down that is used as your credit limit. For example, if you put down $300, that becomes your credit limit. This deposit protects the card issuer, so they are more willing to loan you money even though you do not, at this moment, have excellent credit.
To get the most from a secured card, charge it for small, frequent expenses that you can immediately repay — like groceries or gas — and repay it completely before it’s due each month. Each of these repayments are reported to the credit bureaus, creating a record of good payments. Down the road, appropriate use of a secured card can even get you switched to an unsecured credit card, which is a major milestone on your credit-building journey.
Become an authorized user.
Another way to build credit is to be added as an authorized user on someone else’s credit card account. This means a trusted family member or friend allows you to share in their account history. If they’ve managed their card responsibly — by keeping balances low and making consistent payments — that positive history may appear on your credit report as well.
Becoming an authorized user is often a faster way to build credit, since you don’t need to open a new account or pay a deposit. In a few instances, you don’t even need to utilize the card. Being added to the account alone can benefit your credit file. It’s also important to make sure the primary cardholder continues their good habits, because if they fall behind on payments or carry high balances, that activity could also be reflected on your report.
Report your rent and bill payments.
Rent is often one of the largest bills people pay each month, but most landlords don’t report those payments to the credit bureaus. That means you could pay thousands of dollars a year on time and never see it reflected on your credit report. The same is true for many utilities and cell phone bills.
Today, however, there are services that allow you to report these payments to the bureaus directly or indirectly, such as Experian Boost, Self or Boom. By signing up, you can turn bills you’re already paying into tools for building credit. This is especially helpful for people who are new to credit and may not have access to traditional products like credit cards or loans. Consistently paying rent and bills on time and having those payments reported gives lenders more evidence of your financial reliability.
Get an installment loan or line of credit.
Building credit history often involves showing that you can manage different types of accounts. Two common forms are installment loans and revolving credit. Some types of installment loans include personal loans, student loans and car loans. You borrow a set amount and repay it over time in fixed monthly installments. Revolving credit includes credit cards or a line of credit, where you can borrow, repay and borrow again up to your limit.
Lenders like to see that you can handle different types of credit. It’s what’s known as your credit mix, and can be a factor in your credit score. For example, making steady payments on an installment loan while keeping low balances on a credit card demonstrates balance and responsibility. Just be careful not to borrow more than you can afford to repay. Falling behind on an installment loan or carrying too much credit card debt can quickly hurt your credit report and set back your progress.
Maintain good credit habits.
No matter which tools you use, your habits matter most. The biggest factor in your credit history is your payment history, so always make at least the minimum payment on time. Setting up automatic payments from a checking account or savings account can help you avoid mistakes. Even one missed payment can stay on your report for years, so consistency is key.
Another factor is credit utilization — how much of your available credit you’re using. Try to keep this number below 30%. For example, if your credit limit is $1,000, try not to carry a balance higher than $300. Keeping balances low shows lenders that you’re not overly reliant on credit. Also, avoid applying for too many new accounts at once. Each application adds a hard inquiry to your report, and several in a short period can make you look risky to lenders.
Finally, check your credit reports regularly. You’re entitled to free reports from each bureau through AnnualCreditReport.com. Reviewing your reports helps you spot errors, like accounts that don’t belong to you or incorrect late payments. If you see a mistake, file a dispute right away. Correcting errors can improve your profile and protect you from problems like identity theft.
How long does it take to build credit history?
Building credit is a process and not an overnight fix. If you’re new to credit, it may take three to six months of activity before the bureaus can generate a credit score for you. For people who are rebuilding after bad credit, the timeline depends on what’s in your report. Late payments, collections and bankruptcies take time to fall off, but their impact lessens as you add positive history.
Most people who stick to good habits like paying bills on time, keeping balances low and limiting new debt start to see meaningful progress within a year. Remember, lenders want to see a pattern of responsible behavior. That means the longer you maintain good habits, the stronger your credit history will become.
What affects your credit score?
Credit scores are calculated based on several factors, and understanding them helps you focus your efforts. For example, the FICO® Score breaks down like this:
Payment history (35%). Whether you make payments on time.
Credit utilization (30%). How much of your credit limit you use.
Length of credit history (15%). How long your accounts have been open.
Credit mix (10%). The variety of credit you manage, such as installment loans and revolving credit.
New credit (10%). How often you apply for new accounts.
Knowing these percentages can help guide your choices. For example, focusing on on-time payments and keeping balances low addresses the two biggest parts of your score.
What is a “good” credit score?
Scores usually fall between 300 and 850. While every lender sets its own standards, here’s a general guide:
- Poor: Below 580
- Fair: 580-669
- Good: 670-739
- Very Good: 740-799
- Excellent: 800+
Having a good credit score usually means you can qualify for loans and credit cards with better terms. More importantly, it reflects a solid credit history, one that shows you can borrow money responsibly. Even if you’re not aiming for an excellent score right away, moving from poor or fair to good can save thousands of dollars in interest rates over time.
Why is having a good credit history important?
Your credit history can open or close doors. A strong record can make it easier to get approved for loans, qualify for lower interest rates or even avoid paying deposits for utilities. Landlords often check credit reports, and many employers review them during the hiring process. Good credit also gives you more options. You may qualify for higher credit limits or larger loans, which can provide flexibility when unexpected expenses arise.
On the other hand, a poor credit history can limit your choices. You may be denied loans or only approved with higher fees and interest rates. That’s why focusing on steady progress is so valuable. Even small steps, like paying bills on time or keeping balances low, helps to build momentum and lead to more financial freedom.
Common Mistakes to Avoid
When building credit, it’s important to avoid setbacks that can undo your progress.
Applying for too many new accounts at once can make you look risky, while carrying high balances signals that you might be overutilized — relying too heavily on credit. Closing old accounts too soon can also shorten your credit history, which may lower your credit score.
Another mistake is relying only on debit cards. While they’re useful for budgeting, debit card use doesn’t get reported to the credit bureaus, so it won’t help your credit history.
Finally, don’t ignore your credit reports. Errors, fraud or even simple reporting mistakes can drag down your score if left unchecked. Regularly reviewing your credit reports is one of the easiest ways to protect your progress.
Final Thoughts
Building credit history takes patience, but it’s worth the effort. Whether you’re starting from scratch or trying to recover from past mistakes, the same principles apply: borrow carefully, pay bills on time, keep balances low and monitor your reports. Using tools like secured credit cards, credit-builder loans or rent-reporting services can give you a strong start.
Over time, these small, steady steps will add up. With a stronger credit history, you’ll gain access to better loans, lower interest rates and more financial opportunities. Most importantly, you’ll know that you’ve built a foundation for a more secure and confident financial future.
DISCLAIMER: This content is for informational purposes only and should not be considered financial, investment, tax or legal advice.
