Get the Marcus mobile banking app

Easy mobile access. Download the app

How to Build Credit

Share this article

Building credit can be confusing. How do you do it? What’s the best method? Is there more than one way? Here are a few methods that could help you build or repair your credit.

There are no shortcuts. But there are smart ways to build credit.

A credit history is not something you’re born with. It can take time to build. Keeping an eye to the future can pay off when you need to make a big purchase. Take this scenario for example: Nicole is a recent grad transitioning from the life of a student to a professional. She wants to buy an apartment as soon as she can afford one, which is why she’s started to focus on her finances now.

Having been a student her entire adult life, Nicole’s always spent within her means. That meant living with roommates, putting off purchases and passing up trips with her friends. To maintain her strict budget, she never used a credit card and always made purchases with her debit card or cash. Now that she is no longer a student, Nicole is living on her own. She wants to build up a strong credit history to keep up with her future plans.

Let’s look at a few ways she can make that happen — as well as some financial fictions that could trip her up. 

Fiction: Only credit cards can help you build a credit history


Repaying your debts on time can help you establish a credit history with the major credit bureaus. Aside from your credit card, there are other debts — such as mortgages, auto loans and student loans — that are also reported to credit bureaus and can improve your score when paid on time. Paying other bills that aren’t typically reported, from utilities to medical expenses, may not improve your credit score, but not paying them can damage it if they go to collections and are reported to a credit bureau.   

The Good News

A history of paying your debts on time can increase your credit score. 

Fiction: You can spend as much as you want, so long as you pay your bills


Credit utilization matters. That’s the amount of your outstanding balances versus the amount of credit available to you (i.e., your credit limit) — and it’s among the factors used to calculate your credit score. Generally speaking, credit bureaus like to see that you aren’t using too much of your available credit, i.e., that you haven’t maxed out your credit cards. Responsible credit utilization is important - the general rule of thumb is to keep that ratio low and not maintain over 20 to 30 percent on any card.

The Good News

If you make it a habit to pay on time, credit card companies may increase your credit limit, either automatically or upon your request. 

Fiction: Payment deadlines are just suggestions.


Paying bills on time is important — really. While paying utilities and other household costs on time won’t necessarily increase your credit score, missed or late payments that get reported to a credit bureau can lower it. Payment history makes up a large part of your credit score: Make it a habit to pay on time. 

The Good News

Being financially disciplined can seem like a chore, but paying on time can help increase your credit score.  

Fiction: Avoid credit cards.


Proving you can use — and pay off — credit is important. When you’re living on a tight budget, credit cards can seem like a dangerous temptation to spend more money than you have. But whether you’re spending and paying off small amounts or paying off your balance in full each month, proving that you can pay on time is an important part of building credit. If you pay off your balance every month, credit cards can be a great tool for building credit. 

The Good News

Putting everyday expenses you usually buy with cash on a credit card can help build a strong credit history, as long as you pay on time each month. 

When Nicole opened her first credit card, she stuck to her budget and made sure to always pay her bills in full each month. She had an eye toward the future but didn’t let her potential income cloud her current finances. Because the max on her new card was fairly low, her limited spending helped keep her debt-to-credit ratio low. This was an instance where her experience budgeting as a student came in handy, even as her income started to rise.  

Work toward your reward: Establishing good credit habits when you’re on a tight budget can pay dividends down the line when you are ready to make a big purchase.

Get started with Marcus


This article is for informational purposes only and is not a substitute for individualized professional advice. Individuals should consult their own tax advisor for matters specific to their own taxes and nothing communicated to you herein should be considered tax advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA does not provide any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.  Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.