How to Build Credit: 3 Tips to Consider

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If you ever want to get a personal loan, buy a home, or even sign up for a cellphone plan, you’ll need to have a credit history, which helps businesses and lenders assess your creditworthiness.

Establishing a good credit history is an essential part of any financial journey. For one, it can help you get better borrowing terms when you’re ready to make a big purchase such as a car, major appliances, a home, etc.

But building credit takes time, and we know it can feel especially challenging if you’re just starting out. After all, how can you build credit (or get a credit score) if you don’t have a credit history to begin with? Read on to get three tips on how to get started.

1. Become an authorized user

Getting added as an authorized user on someone else’s credit card account can be a great first step to building credit. This person can be a family member – like your parents for example – or another trusted adult.

As an authorized user, you’ll gain access to the primary cardholder’s credit line and usually be issued your own card to use. The activities on that account will typically be reported to the credit bureaus and reflected in your own credit report. In other words, the primary cardholder’s account history will also become a part of your own credit history.

Good to know: Not all credit card companies will report authorized user activity to the credit bureaus. It’s a good idea to have the primary cardholder contact the credit card issuer to confirm.

If you and the primary account holder are responsible credit card users (e.g., paying your bills on time), it will help you both build a positive credit history. On the flip side, any delinquent or non-payments will have a negative impact on your respective credit reports. This is why it’s important to partner up with someone who has a long, healthy account history and is responsible with how they use credit.

Be aware that the primary cardholder is still ultimately responsible for any purchases charged to the card (even those made by the authorized user) and for making timely payments. It is important that you and the primary cardholder communicate clearly on each of your responsibilities. For instance, how will you pay for your specific purchases on the account and when?

2. Consider applying for a starter credit card

Proving you can use – and pay off – credit is important. For individuals with no credit history, a starter credit card can be a great tool for building credit.

Student credit cards and secured credit cards (which require a cash deposit) are two common types of starter cards. While the size of your credit line may be limited, a starter card can help you build credit over time if you use it responsibly. That means paying off your credit card balances on time every month and avoid overspending.

You’ll want to keep an eye on your credit utilization – that’s the amount of your outstanding balances versus the amount of credit available to you. Responsible credit utilization is important, as it’s a component of your overall credit score. Credit bureaus like to see that you aren’t maxing out your credit cards all the time. The general rule of thumb is to keep your credit utilization ratio below 30%.

3. Report your bill payments

Paying your bills on time can help you build credit. But certain types of bills like your rent, utilities, or streaming services aren’t typically reported to the credit bureaus. Still, there are ways to get these payments reported.

When it comes to rent, talk to your landlord to see whether they can report your payments. Some landlords may already do this for their tenants automatically.

You could also try to get your utility payments reported by contacting the utility company to see if that’s an option. Another way is to get in touch with the national credit bureaus. Some of them offer specific products or services to help you get your rent or utility payments added to your credit report.

Smart habits to maintain a good credit history

Once you start building your credit history, take steps to maintain good credit with some of these smart habits:

  • Continue to pay bills on time.
  • Use your credit card(s) responsibly and try to pay off your balances in full each month.
  • Avoid maxing out your credit cards.
  • Monitor your credit and regularly review your credit report and credit score for any errors.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions.