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How do you build or establish credit?

Oct 14, 2023

As previously mentioned, payment history can significantly impact your credit score. If you have a “thin” credit file — meaning you have few or no credit accounts and only a brief credit history — then there may not be enough information in your credit report to calculate a credit score or it may be lower than you’d like.

If this is the case, you’ll need to take steps to establish a longer credit history before you can focus on improving your credit score.

  • Secured credit cards
    Secured credit cards are designed to help the user build credit history, making them a perfect first step. A secured card requires that you make a deposit up front, usually the same amount as your suggested credit limit. The card then works like any other credit card, with on-time payments contributing toward a positive credit history.
  • Student credit cards
    You may also consider a student credit card if you qualify. You will likely have to provide proof that you are enrolled in school, but these cards are similarly aimed at helping build credit and establish a credit score.
  • Authorized user
    One way to start building credit without applying for a credit card yourself is to become an authorized user on the credit card account of a parent, spouse or other family member. As an authorized user, you would receive a credit card with your name on it and reap the benefits of making on-time payments, but the account itself would not be in your name.
  • Co-signer
    A co-signer is a person who agrees to be legally responsible to pay a debt, such as a car or student loan, if the borrower does not pay back the loan as agreed. Having a co-signer may allow you to secure better loan terms or qualify for a loan you might not otherwise get. In turn, you can begin to build credit, but if you fail to pay, your co-signer will be responsible for the debt.
  • Utility and rent payments
    You can also ask your landlord or your utility companies to report your on-time payments to the three nationwide consumer reporting agencies. Although these kinds of payments typically don’t appear on credit reports, if you know you have a positive payment history, you may be able to have them considered in your favor.

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