How to build credit
Editor's Note
Whether you’re planning out the perfect rewards credit card to apply for next or you’re preparing to buy your first home, having good credit matters.
The condition of your credit score can mean the difference between qualifying for financing or having a lender deny your application. Your credit could also determine whether you can receive affordable interest rates and attractive financing offers or whether you have to pay more to borrow money.
Good credit can work to your advantage, while bad credit (or no credit) could hold you back. So, you’ll want to do everything in your power to figure out how to build credit and maintain a good credit score.
The guide below provides six solid tips on the best ways to build credit. You’ll also learn about a few credit mistakes you should try to avoid along the way.
Start with a credit check
Before you apply for new credit, even as a beginner, it’s smart to review your credit reports from all three major credit bureaus. You might believe that your credit reports with Equifax, TransUnion, and Experian are blank slates. But it’s critical to confirm there are no surprises before you allow a lender or credit card company to check your credit report and score as part of an application for financing.
You can get a free copy of each of your credit reports once every week. To claim this freebie, visit AnnualCreditReport.com.
Next, go over each report in detail. Look for errors, questionable information and red flags. If you discover credit report errors, you can dispute them with the appropriate credit reporting agency. If your reports show signs of potential fraud or identity theft, you may need to take additional actions as well.
Related: How to check your credit score for free
Get the credit you already deserve
Even if you haven’t applied for traditional credit in your own name, you might already have certain monthly payment obligations. Are you responsible for a monthly utility bill, mobile phone bill, rent payment or even a subscription service? If so, you might be able to add some of that positive payment history to one or more of your credit reports.
Credit bureaus won’t allow you to self report accounts on your own as a consumer. However, there are third-party services that can scan your bank account and credit card statements for any payment history on certain types of bills. If these services discover eligible accounts, they can share the account information with one or more of the credit bureaus. As a result, you might wind up with some positive accounts (also known as tradelines) on your credit report.
Some examples of services that might help you add eligible utility bills, rent payments or other types of accounts to some of your credit reports are:
- Experian Boost: Free
- eCredable Lift: $9.95 per month
- RentTrack by Level Credit: $6.95 per month
Open a starter account
When you’re ready to start building traditional credit, it can be helpful to search for credit card companies or lenders that are willing to work with people with little to no credit history. Applying for a starter credit card is one of the best ways to build credit. If you’re a student, you might want to consider a student credit card as well.
Of course, you probably want to avoid credit cards that require good to excellent credit for approval if you haven’t had the chance to establish a solid credit history yet. You can keep those types of credit cards on your wish list for the future. If you apply for cards that don’t match your credit profile now, the card issuer might deny your application.
You could also consider opening a credit builder loan if you’re looking for another way to build credit from scratch. Credit builder loans are a special type of installment loan designed to help people establish credit. Just be sure to find a lender that reports to all three credit bureaus and review the fees in detail before you apply for this type of account.
Related: Credit cards 101: The beginner's guide
Manage your new account with care
Whether you open a new credit card, a credit builder loan or something else, you should make a commitment to manage your new account in a responsible way. A new credit account will only have the potential to help you build credit if you exercise sound credit management practices.
That includes avoiding applying for too much new credit at once. Too many hard inquiries can decrease your credit score.
And with credit cards, it’s important to pay your entire statement balance off every month — on time. This good habit can help you avoid paying costly interest charges and can help you keep your credit utilization ratio low — a good move where your credit score is concerned.
Related: TPG’s 10 commandments of credit card rewards
Consider opening more credit
Once you’ve gotten the hang of managing your starter accounts responsibly, you might want to consider adding more credit accounts to the mix. Having multiple types of accounts on your credit reports — like credit cards, an auto loan and a student loan — has the potential to help your credit score thanks to the way credit scoring models work.
You can also think about asking someone you know for a favor if you want to give your credit-building efforts a potential boost. If a family member or friend has a credit card account that they’re willing to add you to as an authorized user, you might be able to benefit from the positive credit history associated with that account. (Note that it’s important that the account has an on-time payment history and a low credit utilization rate. Otherwise, being an authorized user could damage your credit score rather than help it.)
Related: Quick Points: Have good credit? Share it with an authorized user
Continue monitoring your credit reports
As you continue to use your new credit accounts and repay your creditors each month, it’s wise to keep a close eye on your credit-building progress. In other words, you should continue to monitor your credit reports (and ideally, your credit scores too).
As mentioned, you can get free copies of your credit reports every week via AnnualCreditReport.com. There are also numerous websites you can use for free credit monitoring with one or more of the credit bureaus. If you’re willing to pay a monthly fee, the credit bureaus, myFICO and other third-party service providers offer three-bureau credit report and score monitoring services as well, with varying features and price points.
However you decide to proceed, as long as you consistently review all three of your credit reports, you should be in good shape.
Bottom line
Building credit takes a lot of effort. You’ll want to start by accessing your credit report and making sure that you already have all eligible accounts on there. The next step should be to apply for a starter (or student) credit card, making sure it’s one that does not have a high credit score requirement. Then, keep your credit utilization low by paying the statement balance on time every month. Having a variety of account types, like mortgages and student loans, on your credit report can increase your score. Finally, keep an eye on your credit report to see how your score changes over time and monitor it for any fraudulent or incorrect applications.
Related: Best first credit cards of 2024
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Intro offer
Annual Fee
Recommended Credit
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
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- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.
Rewards Rate
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Intro Offer
You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
Credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.Excellent to Good
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.