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Establishing Credit

There are several reasons why it is important to establish credit. The interest rate you will pay when purchasing a car, your ability to lease an apartment, whether or not you get that new job, if you have to pay a security deposit when setting up utilities—these are all things that your credit score can directly impact.

Limited credit history can impair consumers’ abilities to withstand financial shocks and achieve financial stability. When they encounter emergency situations that require them to borrow money, and traditional credit products are not available to them, they may find it necessary to use higher-cost alternatives to bridge the financial gap. A credit score isn’t something that you’re automatically given. For instance, to have a FICO Score, you need at least one account that has been open for six months or longer. You also need at least one creditor reporting your activity to the credit bureaus within the past six months. According to Experian, it takes between three and six months of regular credit activity for your file to become thick enough that a credit score can be calculated.

How to Build Credit with a Credit Card

Credit cards are a very useful type of credit tool, and when used wisely, they can help you build your credit. However, it's important to manage credit card use because credit cards can also be a route to debt if you misuse them. Here are three ways you can build credit with a credit card:

Open your first credit card account. 

If you have already established some credit history, look for a low spending limit card, which may be easier to qualify for if your credit history is limited. Make small charges that you can easily pay off right away, and pay the balance in full every month. This will help build a profile on your credit report of responsible credit use and reliable payment.

Get a secured credit card.

With little credit history, it may be difficult to get a regular credit card; a secured credit card may be an option. Secured credit cards are usually tied to a savings account, and the card limit is typically the amount in the account. Not all lenders report secured cards to reporting agencies, but the lender may be willing to convert the account to a traditional credit card after a certain period of time. 

Open a joint account or become an authorized user. 

If you're having trouble getting your own credit card, another option for building credit is to become an authorized user on someone else's account or to open a joint account with someone who has a good credit history. Parents may choose to help a younger person with little credit history by adding them to the parents' existing credit card accounts as an authorized user or by opening a new card jointly. For joint accounts, you are responsible for repaying charges on the card, and so is the other account holder. If you don't repay money borrowed on a joint account, the joint cardholder will have to, or you'll both feel the credit impact of late or missed payments.

How to Build Credit without a Credit Card

Credit cards aren't the only option for building credit. Remember, your credit report is a snapshot of how well you manage what you owe. Whenever you use credit wisely, that information can be included in your credit report. Here are three ways to build credit without a credit card:

Pay Student Loans 

If you have a college degree, you probably have at least some student loan debt. Student loans are reported to the credit bureaus, so making your student loan payment on time every month can help build your credit.

Get an Auto Loan

Auto loans are among the easiest types of loans to obtain. If you plan to buy a vehicle, shop around for the best possible deal, secure the loan and make the agreed-upon payments on time every month. If you have trouble finding a loan on your own, you may need a co-signer to share responsibility for the payments. 

Ask for Credit

Just because you've never had a loan or credit card doesn't mean you don't know about paying bills. If you reliably pay your rent and utilities on time, you've demonstrated good money management habits and can ask for credit for that good track record. Rental payments and utility bills don't typically appear on a credit report unless you fail to pay, and the leasing company or service provider sends the delinquent amount to a collection agency or files suit against you to recover the past due amount. 

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Build Credit Wisely

To build credit wisely, learn how the Three C's of Credit can affect your score and how you can use these three factors to strengthen your credit:


 A lender may decide whether you possess the honesty and reliability to repay debt based on your credit history. Lenders are likely to look at your credit use, bill payment, residential history, and how long you've worked at your current workplace.


A lender will want to know if you have valuable assets such as real estate, personal property, investments, or savings to repay a debt if income is unavailable.


Lenders will look to see if you have been working regularly in an occupation that is likely to provide enough income to support your credit use. They may look at your salary, check whether you have pre-existing loans or debts, and assess whether you have family members who depend on your earnings.

Additional Learning Resources

Find the Best Credit Card

This brochure from the Consumer Financial Protection Bureau contains information on choosing a credit card.

Find a Credit Card

Who are the Credit Invisibles?

Learn about the impact of limited credit history in this report from the Consumer Finacial Protection Bureau.

Credit Invisibles

GreenPath Financial Wellness

Walk through your credit report with a certified counselor and learn how to improve your credit score.

Learn More

The content on this page provides general consumer information. It is not legal advice or regulatory guidance. We do not endorse or guarantee the accuracy of third-party information.

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