5 Easy Ways You Can Start Building Your Credit Today

Building credit is an important financial step that most adults need to take. If you’re interested in buying a house or taking out a loan, having good credit is crucial to making sure you can afford these financial investments. 

If you’ve never had a credit card and have never taken out a loan, you probably don’t have any credit. This means you need to build up your credit score and prove you’re responsible enough to borrow money from a bank or another financial institution. 

Fortunately, there are many ways you can build your credit. While it takes time, starting now can help to put you in a better financial situation down the road. 

Below are five easy steps you can take to start building your credit today. 

1. Sign up for a credit card through your local bank. 

One simple way you can start building your credit is by signing up for a credit card. Unlike a debit card, you don’t need to put any money onto a credit card before you can start using it. 

That’s because with credit cards, you borrow money from your bank and use those funds to make a purchase. Afterward, you’re responsible for paying back whatever you borrowed. 

Your credit score and credit history are used to determine the type of credit card you can apply for. If you haven’t built up your credit yet, this means you won’t be able to apply for just any card at your local bank. 

However, banks usually offer introductory cards you can apply for and start using. These cards usually have: 

  • Few eligibility requirements. Some cards require you to have an excellent credit score before you can apply for a card. However, this is not the case with these cards. Usually, introductory credit cards are available to anyone who has no credit or a credit score that’s less than perfect. 
  • Preapproval opportunities. If you already have a checking or savings account with a bank, check and see if you’re preapproved for any of their credit cards. This is a good way to see what you could be eligible for without formally applying for a card. 
  • Low credit limits. This means you won’t be able to spend a lot of money with your credit card at one time. However, once you prove that you’re a trustworthy borrower, your limit will likely increase. 

Even though these cards usually have few sign-up requirements, you may find yourself in a situation where you can’t get approved for one. While this is inconvenient, there are still other ways you can use a credit card to build your credit. 

One way to do this is by opening a secured credit card account. Unlike with traditional credit cards, you need to provide a cash deposit before you can start using your secured card. 

Whatever amount you deposit will be the maximum amount you can spend with your card. The more you use your card and faithfully pay off any remaining balances you have each month, the more you’ll build your credit. 

Best Credit Cards If You Have No Credit 

2. Become an authorized user on your relative’s card. 

If you have a parent or spouse with good credit, you might be able to reap some of the benefits that they’ve earned by having good credit. If you have no credit history, this can be a good way to help you build credit fast. 

To become an authorized user, a cardholder needs to add you to their account. Before you become an authorized user to someone’s account, make sure the account holder: 

  • Has a good credit score. 
  • Has a long credit history with the card you’re being added as a user to. 
  • Pays his or her bill in full each month. 
  • Utilizes a low portion of his or her available credit each period. 

Over time, you should see your credit score improve simply by being associated with a healthy line of credit. During this time, you can use your credit score as an indicator as to how well you’re building your own credit. 

Keep in mind that when you’re an authorized user to someone’s account, you aren’t legally responsible for paying the bill each month. However, this doesn’t mean you should spend someone else’s money without giving it a second thought. 

When you’re added as an authorized user to someone else’s account, this means that person trusts you. Furthermore, any unpaid balance the account holder carries from one month to another can affect both of your scores. Keep this in mind before you start spending. 

3. Make sure you don’t apply for too many cards at once. 

Whenever you apply for a new credit card, it appears as a hard inquiry on your credit history. Banks and other potential lenders can see this when they run a credit check on you. 

There are two main reasons why you shouldn’t apply for a large number of credit cards at one time. The first is because hard inquiries cause a temporary drop in your credit score. This means that the more cards you apply for at one time, the more your score is likely to drop during that period. 

Second, you should be aware of how applying for multiple cards at one time looks to prospective lenders. 

For example, banks and other financial institutions might think you’re about to run out of money. They may also worry that you plan to be out of work soon and need to establish lines of credit so you can support yourself. 

Keep all of this in mind before you apply for multiple cards at once. While having a credit card can certainly help build your credit, applying for many different cards in a short time period can have a negative effect on your credit score. 

4. Pay off any existing debt you have. 

There are many ways to accumulate debt. Some of the most common forms include: 

  • Credit card debt. 
  • Unpaid medical bills. 
  • Student loans or car loans. 
  • Mortgages. 

If you have any of these types of debt, it is likely having a negative affect on your credit score. 

Furthermore, if you have a delinquent payment that has been sent to collections, this can have a long-term effect on your credit history. 

Therefore, one of the most efficient ways you can improve your credit today is by taking steps to pay off any existing debt you currently have. 

While it can be hard to catch up on missed payments, paying off debt is one of the most effective ways to improve your credit over time. 

5. Pay your bills on time. 

Your credit history is a reflection of how likely you are to make payments on time. Another factor that you might not realize can affect your credit is how consistently you pay your bills. 

Whether it’s your electricity or your internet bill, it’s critical that you pay your utilities in full each month. 

Any remaining balances you carry can lower your credit score and appear on your credit report. This is especially true if your unpaid bills go to collections.