Five ways you can establish credit:
1.Apply for a secured credit card
- If you’re building your credit score from scratch, you’ll likely need to start with a secured credit card. A secured card is backed by a cash deposit you make upfront; the deposit amount is usually the same as your credit limit.
2.Apply for a credit-builder loan
A credit-builder loan is exactly what it sounds like — its sole purpose is to help people build credit.
Typically, the money you borrow is held by the lender in an account and not released to you until the loan is repaid. It’s a forced savings program of sorts, and your payments are reported to credit bureaus.
3.Become an authorized user on someone else’s credit card
A family member or significant other may be willing to add you as an authorized user on his or her card. As an authorized user, you’ll enjoy access to a credit card and you’ll build credit history, but you aren’t legally obligated to pay for your charges.
4.Get a co-signer
- It’s also possible to get a loan or an unsecured credit card using a co-signer. But be sure that you and the co-signer understand that the co-signer is on the hook for the full amount owed if you don’t pay. (See “What You Need to Know About Co-signing.”)
5.Get credit for the rent you pay
Rent-reporting services such as Rental Kharma and RentTrack take a bill you are already paying and put it on your credit report, helping to build a positive history of on-time payments.
Build your score with good habits
- 1. Make 100% of your payments on time, not only with credit accounts but also with other accounts, such as utility bills. Bills that go unpaid may be sold to a collection agency, which will seriously hurt your credit.
- 2. Keep your credit card debt low. We recommend paying your balance in full each month, but if do you carry a balance from month to month, don’t let your debt balance exceed 30% of your credit limit.
- 3. Avoid opening too many new accounts at once; new accounts lower your average account age, which makes up part of your credit score.
- 4. Keep accounts open for as long as possible. Unless one of your unused cards has an annual fee, you should keep them all open and active for the sake of your length of payment history and credit utilization.
- 5. Check each of your credit reports annually for errors and discrepancies.